“Three-year CAGR has accelerated to 23% in Q1FY23 from 15% in 4QFY22," according to analysts from Kotak Institutional Equities. “Given strong revenue growth print in Q1, Titan can deliver 22% growth in standalone jewellery sales in FY23 even with flat y-o-y sales over 2Q-4QFY23E. There is upside risk of about 500 basis points (bps) to our forecast of 20% y-o-y growth in standalone jewellery sales in FY23E," the broking firm said. One basis point is 0.01%.
The jewellery business is vital for Titan, accounting for a lion’s share of its revenue. Last quarter, sales were robust during Akshaya Tritiya in May after two years of lockdowns imposed to contain the spread of coronavirus. Growth in plain gold jewellery was nearly three times what it was a year ago. Titan said studded mix was better than last year and comparable to pre-covid levels seen during Q1. A high studded share should augur well for margins, said analysts.
Titan’s watch segment, the next big revenue contributor, also did well, posting its highest ever quarterly revenue in Q1FY23 led by growth across all brands and products.
Overall, Titan’s total standalone sales in Q1FY23 grew 205% y-o-y and the three-year CAGR was 20.5% over Q1FY20, a non-disrupted first quarter in the last three years.
Investors have given a thumbs up. Titan’s shares rose 5.7% on Thursday. Even so, the stock is 23% lower than the 52-week highs of March. In general, higher valuation stocks have corrected amid the broader market turmoil in recent months. Further, gold prices remain high and there have been concerns about the impact on jewellery purchases.
After the notable Q1 growth performance, investors will watch whether the momentum persists. “While Titan has put up a good show in Q1, whether it can surpass expectations for the rest of FY23 remains to be seen. Going ahead, the base would be higher. Plus, consumers may want to curtail purchases because of high inflation levels," said Jay Gandhi, analyst at HDFC Securities. The import duty on gold was raised recently and, thus, investors would do well to track its impact. “In the short run, this is likely to impact demand and, accordingly, hurt volumes," Gandhi said.
