Titan Company Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Titan Company Ltd (TITAN) Q1 FY23 Earnings Concall

Q&A Highlights:

• [00:02:36] Avi Mehta of Macquarie enquired that with the steep custom duty increase in jewelry, and the resultant consumption scenario and competitive landscape changing, if there is any risk in TITAN’s ability to reach 2.3, 2.4 times growth over FY18-23. Ajoy Chawla replied TITAN is not seeing too much of a sharp impact and there is no significant change in nature and structure of competitive framework.

• [00:05:33] Avi Mehta of Macquarie asked about healthy margins across segments in 1Q23, and if there were any one-offs driving this. Ajoy Chawla CEO Jewelry said that all business have different operating leverages. In jewelry there is some gain that came through 2-3 elements; diamond price, spot gold purchase and forward contango. So there’s some one-off of 80-90 bp.

• [00:07:38] Abneesh Roy from Edelweiss enquired about high margins on eye care and if it’s sustainable going forward. Saumen Bhaumik CEO Eyewear replied that for several quarters TITAN has demonstrated that 64%, 65% gross contribution works and it seems sustainable in future. This is driven by house brand focus, channel mix, in-house production, and India sourcing. So 15% plus is sustainable.

• [00:14:36] Rakesh Jhunjhunwala from Rare Enterprises asked about Fastrack growth. Suparna Mitra replied that Fastrack watches grew well in 1Q23 vs. 1Q22 by 120%. The big trust has been in the entry price products. Also TITAN said, smartwatches continue to do well.

• [00:17:40] Percy Panthaki with IIFL enquired that with traction in margins in jewelry, if TITAN’s guidance of 12-13% EBITDA for FY23 is on the conservative side. Ashok Kumar CFO answered that the company feels it’s okay with the guidance QonQ and the guidance remains 12-13% EBIT margin for jewelry.

• [00:20:02] Percy Panthaki of IIFL asked about the target number of stores expansion for Tanishq in FY23. Ashok Kumar CFO answered that the list is of 50, but the company believes that about 35-40 is what might materialize. And if TITAN gets right property at right places, the count might go up to 50.

• [00:20:27] Percy Panthaki of IIFL enquired about CaratLane’s 9% EBIT margin and if TITAN can do a double digit EBIT margin two years down the line. Ashok Kumar CFO said that over a long term period of about 3-5 years, it has potential to reach to double digit EBIT margin.

• [00:22:17] Shirish Pardeshi with Centrum Broking asked about the reason for capital employed in jewelry segment going up. Ajoy Chawla CEO Jewelry clarified that the company has taken a higher inventory position from 4Q22 and 1Q23. TITAN added that it will continue to take some more aggressive bet on inventory looking for growth.

• [00:28:13] Shirish Pardeshi with Centrum Broking enquired about volume growth for watches growing 108%, and going forward with everything normalizing what could be the volume growth. Suparna Mitra answered that it’s due to the base effect of 1Q22 and on a normal basis it’s not sustainable.

• [00:36:49] Tejash Shah from Spark Capital asked how the margins are tracking in wearables vs. watches. Suparna Mitra replied that margins are lower in wearables as the category itself is lower margin category. For watches, TITAN has been the market leaders.

• [00:41:02] Kunal Vora of Baroda BNP Paribas asked about diamond prices and how high are they vs. last year. Ajoy Chawla CEO Jewelry said there was a series of price increases in line with procurement of diamonds. The price continues to be quite a ride so far and it’s not coming down any time soon.

• [00:42:24] Kunal Vora of Baroda BNP Paribas enquired about the status of hallmarking in India and if TITAN has seen any market gain due to this. Ajoy Chawla CEO Jewelry replied that TITAN is not seeing any structural impact right now. The market is getting used to it. But said smaller jewelers might face some impact.

• [00:50:32] Devanshu Bansal from Emkay Global asked that due to recent custom duty increase, if TITAN anticipates some inventory gains as the company was having high inventory at FY22 end. Ashok Kumar CFO replied that while some gain would flow in, in 2Q and 3Q, but market is reacting in different ways on different pricing.

• [00:52:28] Anush Mokashi from Yadnya Academy asked about the sales contribution from international business from Dubai and USA till date. Ashok Kumar CFO clarified that TITAN doesn’t have any presence in the US yet. The company added that it has aggressive plans for GCC and ratcheting up the expansion plan in GCC and plan more aggressively for the US.