Titan Company Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from Titan Company Ltd (TITAN) Q2 FY23 Earnings Concall

Q&A Highlights:

• [00:02:41] Abneesh Roy of Nuvama asked about the reason for studded ratios in jewelry being lower vs. pre-COVID levels. Ajoy Chawla CEO Jewellery said that it was due to 2Q20 being slightly abnormal quarter due to gold price shooting up and studded share a bit overstated. However, TITAN is seeing a pretty healthy growth in studded.

• [00:05:07] Abneesh Roy of Nuvama also asked about International Jewelry business outlook over the next three years. C K Venkataraman MD replied that the company is very gungho about the international business, with lot of franchisees from India wanting to partner with TITAN internationally. TITAN is also looking at external partners. The goal for the International jewelry business is INR2,500 crores by 2025.

• [00:11:38] Jaykumar Doshi from Kotak enquired if it’s usual that YoY sales growth ex-bullion being 18%, while city sales growth being about 13%. Ajoy Chawla CEO Jewellery answered that the 13% should be read as 15% across all channels. So the difference from 18% to 15% is similar to what’s seen in previous quarters.

• [00:12:46] Jaykumar Doshi from Kotak asked that TITAN’s 1H23 EBIT margin for jewelry standalone was 14.4% and if it would like to upward revise as it had stated the comfort zone as 12-13%. Ashok Sonthalia CFO said that the focus on current quarter of 15.3% is the jewelry margin. Also there is about 2% represented in it by items that are not sustainable. So the 12-13% is more comfortable.

• [00:13:55] Jaykumar Doshi from Kotak asked if diamond prices have come off from its peak. Ajoy Chawla CEO Jewellery answered that diamond prices are no longer going up as earlier, but there is no reduction seen. However there is a bit of softening on the higher carated solitaires. TITAN believes prices have hit the peak and doesn’t expect it to go further.

• [00:14:44] Avi Mehta with Macquarie asked about watches and EyeCare segment margin of 13% and 15%, if it can be breached going forward and if there’s any one offs. C K Venkataraman MD clarified that there is no one-offs in watches and EyeCare. TITAN still believes mid-teen is the number for EyeCare. On watches, it’s growing well, but 13-14% margin seems to be better expectation.

• [00:25:57] Percy Panthaki from IIFL asked about the situation of price competition amongst the organized players. Ajoy Chawla CEO Jewellery replied that the price competition continues and it has intensified. Also added that irrespective of organized or individual, the price competitive intensity is high.

• [00:32:37] Siddhant Dand of Goodwill enquired how is the Caratlane balance sheet looking like and if they will need further equity infusion. C K Venkataraman MD answered that Caratlane is good to go for now. And Caratlane has the borrowing capacity and banks are willing to extend them at competitive rate.

• [00:33:51] Siddhant Dand with Goodwill asked about the market size and focus of IRTH, the new launch in the purses division. Manish Gupta answered that market size is expected to be about INR4,500 crores. Of this one-third is organized, growing at fast play. In 5 years it’s expected to be about INR3,000 crore. The focus is of targeting INR1,000 crore in INR3,000 crores organized share.

• [00:35:32] Manish Poddar of Motilal Oswal enquired about the broader breakup of ad spend annually of jewelry and other segments. C K Venkataraman MD said that it cannot be disclosed but added that businesses are at different levels of maturity and scale.

• [00:38:18] Siddhant Dand from Goodwill asked about Taneira, which remains an unknown brand relatively and when TITAN is planning an inflection point. Ambuj Narayan Taneira said TITAN is investing in ad and building brand visibility with good results. Having a brand ambassador is not on the cards right now. At FY22, there were 20 stores and currently there are 31 stores in 14 cities. In FY23, TITAN plans to have around 50 stores and next year plans to open about 30-35 stores, mostly franchisee stores.

• [00:42:19] Latika Chopra from J.P. Morgan asked about new buyer growth on a like-to-like basis, excluding new stores. Ajoy Chawla CEO Jewellery said, TITAN is seeing healthy like-to-like buyer growth, including new, total and same store growth.

• [00:45:09] Latika Chopra with J.P. Morgan asked about store expansion outlook largely for FY23.  Ajoy Chawla CEO Jewellery said Tanishq will probably see totally new stores of 30, 35, but might also land up expanding about 20 odd stores by the end of the year. Mia will probably see a 60, 70 store additions, and Caratlane also is targeting for an aggressive similar number of stores.

• [00:49:16] Vishal Gutka of PhillipCapital enquired about any benefit to TITAN in terms of hallmarking being made compulsory. Ajoy Chawla CEO Jewellery answered that it’s difficult to estimate, but on a broader perspective the migration of customers from unorganized to organized continues to be a secular trend.

• [00:51:42] Anush Mokashi from Yadnya Academy asked about south region contribution in the jewelry segment. Ajoy Chawla CEO Jewellery replied that it’s beginning to get to its fair share among the four regions. By the end of FY23, it might be slightly less than one-fourth contribution.