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Motilal Oswal Report
Titan Company Ltd.'s Q1 FY21 results were broadly in line with estimates. Gold volumes declined by 81% during the quarter.
However, decent recovery was seen in June 2020 with Tanishq's like-to-like growth declining 18% YoY.
The recovery prospects in the jewellery segment (over 80% of sales) appear brighter with good demand in July 2020 (101% of sales in July 2019, albeit aided by weak base and significant activation in July 2020) and first week of August 2020 as well.
However, recovery in watches and eyewear is tracking slower than jewellery. Another impact of ineffective hedges on margins in Q2 FY21 as well is expected.
However, we believe there is a possibility that recovery in the jewellery business may take place in Q3 FY21, instead of Q4 FY21 as guided by management. However, given the volatile demand and Covid-19 environment, we prefer to be conservative and are assuming recovery in Q4 FY21.
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