TITAN - Titan Company Limited Share Price

In the Q1 FY'26 earnings call, Titan Company Limited's management expressed a cautious yet optimistic outlook for the remainder of the fiscal year. Notably, C.K. Venkataraman, the Managing Director, indicated that the quarter had been satisfactory across all segments of the business. Ajoy Chawla, CEO of the Jewellery Division, acknowledged the high base effect from the previous year due to a significant customs duty reduction and noted uncertainties affecting gold prices as factors to monitor moving forward.

As for key forward-looking points:

1. Jewellery Growth: The management expects some moderation in growth for the jewellery segment due to a high base, especially in Q2 FY'26. Average ticket size and repeat customer engagement strategies are in play despite high gold prices.

2. Margin Guidance: The management maintained an EBIT margin guidance of 11%-11.5%. There were one-time benefits in Q1 "“ INR 100 crores equally shared between jewellery and watches, which are expected to reverse in subsequent quarters.

3. Market Share: Ajoy Chawla claimed that market share in the jewellery segment had been sustained, with an approximate market size of INR 75,000 crores, while Titan's collective business could account for around INR 17,000-18,000 crores.

4. Retail Expansion: The company plans to catch up on store openings in Q2, aiming for strategic growth particularly before the festive season.

5. Innovations in Product Offerings: The management highlighted plans to introduce lower karatage products and adapt to the increasing gold prices with new offerings to attract budget-conscious consumers.

6. Sustainable Growth Projections: There is optimism for sustainable growth in watches, with the expectation for mid-teen EBIT margins for the full year.

Overall, the management is navigating market uncertainties while focusing on innovations and customer engagement strategies to drive future growth.

1. Question: "Do you foresee some growth moderation in the rest of FY '26 in the jewellery segment due to the higher base effect from the previous quarters?"

   Answer: Yes, I acknowledge that Q2 has a higher base effect due to last year's custom duty reduction. While we've seen good initial momentum in Q2, various external factors, including gold price volatility, could affect our growth. We're monitoring closely and remain optimistic but cautious about the overall trajectory for the year.

2. Question: "Could you clarify the nature of the one-off that contributed 50 bps to margins in Q1, and will this reverse in the remaining quarters?"

   Answer: Certainly. The INR 100 crore one-off was split between jewellery and watches, notably stemming from inventory revaluation in watches. This one-off will reverse in upcoming quarters. Despite the reversals, our margin guidance remains 11% to 11.5% for FY '26, and we'll monitor how other measures impact margins as we progress.

3. Question: "How is the market share in the jewellery segment evolving? Are we lagging behind larger players?"

   Answer: The jewellery market is complex, with multiple players in the field. We believe we've sustained our market share nationally during Q1, albeit fluctuations exist regionally. We must recognize our base is higher, which may impact the same store sales growth comparison with smaller competitors entering the market.

4. Question: "How are you handling the introduction of 9-carat gold jewellery amidst rising costs?"

   Answer: We launched 9-carat diamond jewellery to cater to affordability without compromising on style. CaratLane has expanded this offering across stores, seeing steady traction. We're optimistic as this format aims to capitalize on the gifting segment, aligning with customer preferences in a shifting market landscape.

5. Question: "Could you discuss the sustainability of margin performance in the watches segment as you move forward?"

   Answer: Our expectation remains mid-teen margins for watches in FY '26. The recent high margin was aided by one-off factors. We now aim to maintain a robust product strategy while balancing costs against customer demand, with the understanding that market dynamics will dictate our ability to sustain these margins.

6. Question: "Given the high gold prices, have you seen a shift towards lower making charges and their impact on your competitive landscape?"

   Answer: Yes, as gold prices rise, customers are gravitating towards lighter-weight and lower karat products to manage costs. This shift affects demand for complex designs with higher making charges. We continuously evaluate our pricing strategy to align with consumer preferences while maintaining our competitive edge.

7. Question: "What's your take on lab-grown diamonds and potential impact on market share?"

   Answer: Currently, lab-grown diamonds constitute less than 2% of the diamond market. Though there's potential growth, consumer preference for natural diamonds persists, particularly among first-time buyers who value authenticity. We're keeping an eye on market developments but have no immediate plans to enter the lab-grown segment.

8. Question: "Can you elaborate on the outlook for studded jewellery growth?"

   Answer: Our current outlook for studded jewellery is cautiously optimistic. While we are targeting improved buyer engagement, recent challenges in certain segments, particularly solitaires, have affected growth. However, we are witnessing stronger new customer engagement in studded offerings, hinting at opportunities ahead.