Titan Company Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Titan Company Ltd (TITAN) Q2 FY24 Earnings Concall

• Jewelry Business Growth
  • Jewelry business saw strong 27% growth in customer price terms in Q2.
  • Primary sales growth was lower at 20-21% due to higher discounts and promotions vs. last year.
  • Underlying jewelry demand momentum remains robust.
• Margin Outlook
  • GM expected to remain stable for most segments except some impact in jewelry business.
  • Jewelry business margins may see some dilution over next 6-7 months due to inventory effect of diamond price corrections.
  • Impact is not expected to be very material.
• Tanishq vs. CaratLane
  • Tanishq gaining share in high value gold and diamond jewelry segments given low existing share.
  • 50% of Tanishq’s growth driven by ticket size increase, rest by new buyers.
  • CaratLane focused on affordable jewelry segment where scope for ticket size increase is limited.
  • CaratLane growth more buyer-driven, especially in sub-50k price points.
  • New buyer growth for Tanishq much higher in greater than INR2 lakh ticket sizes.
• New Buyer Profile
  • New buyers contributed 48% of jewelry sales.
  • Typically start at lower ticket sizes of greater than INR75,000 when sampling brands.
  • Migrate to higher tickets of INR2 lakh plus over 3-4 years.
  • Largely traditional plain gold buyers shifting from unorganized sellers.
  • Metros and bigger cities also see studded buyers in Mia and Tanishq sub-50k range.
• International Tanishq Performance
  • Opened 13 Tanishq stores outside India including Singapore, Houston, Qatar.
  • Performing well with high studded jewelry sales shares.
  • Getting good repeat customer traction.
  • Recently opened first international MIA store in Dubai.
  • Helping attract non-Indian customers too.
• Zoya Expansion
  • Currently has 8 stores, targeting 15 stores by next Diwali festival.
  • Besides standalone stores, Zoya also present in Tanishq galleries.
  • Consumer sales was INR140 crores last year, targeting 50% growth this year.
  • Margin profile better than Tanishq given 95% studded jewelry.
  • All stores are currently company owned, may evaluate franchise model.
• Lab Grown Diamond Impact
  • Currently limited impact in India, more prevalent in US bridal segment.
  • Price of lab grown diamonds crashing, causing issues for retailers selling both.
  • In India, natural diamonds have stored value and investment appeal.
  • No demand for lab grown diamonds seen currently in India.
  • Will monitor impact over next 3-5 years and explore options accordingly.
• New vs. Repeat Buyer Contribution
  • Typically see 47-53% split between new and repeat buyers.
  • Skewed towards repeat buyers in mature stores, new buyers in new stores.
  • Repeat buyers spend 2-3x more over lifetime at Tanishq.
  • For CaratLane and Mia, repeat buyers buy more frequently but at similar ticket sizes.
• Margin Performance and Outlook
  • Sharp expansion in margins excluding bullion to 14%.
  • Q2 typically has higher margins than Q1 due to festive diamond activations.
  • This year margins normalized, decline of 1.3-1.4% versus last year.
  • Higher studded share, better gold portfolio realizations helped margins.
  • Guidance of 12-13% gross margins for jewelry division remains consistent.