Titan Company Q4 Preview | Standalone profit likely to grow 17%, despite a dip in revenues

The sequential decline in profits is more pronounced as its main jewellery business witnessed a decline of 4 percent in Q4FY22 due to high base and the impact of lockdown. The sudden spurt in gold prices in March due to geo-political crisis also negatively impacted the performance of jewellery business during the quarter.

Brokerage firm Kotak Institutional Equities forecasts a PAT of Rs 771 crore for the quarter at a YoY growth of 46 percent. On a sequential basis, it sees the PAT declining by 22 percent.

Emkay Research is sceptical about the performance during the quarter as it expects only a 9.4 percent year on year growth in PAT to Rs 579 crore. This works out to a sequential decline of 41 percent.

Revenues

The revenues for the Tata group company for the quarter are expected to decline 2.8 percent on-year to Rs 6,935 crore as against Rs 7,135 crore recorded in the previous corresponding quarter, the CNBC-TV18 poll suggests. On a sequential basis, the revenues are plummeting by 27 percent compared to Rs 9,515 crore last quarter.

Kotak expects the company to post 11 percent on-year growth in revenues to Rs 7,920 crore which is a sequential decline of 17 percent.

“We model 17 percent YoY growth in jewellery segment revenues (+20.6 percent 3-year CAGR) on LFL (like for like) basis (excluding sale of gold ingots/bullion) driven by about 8-9 percent YoY increase in gold price and 20 percent + YoY increase in diamond prices,” a report from Kotak Institutional Equities said. It expects 15.5 percent yoY growth in watches and 34 percent YoY growth in eyewear segment.

Emkay Research conservatively expects the revenues to decline both on YoY and sequential basis with revenues at Rs 6,969 crore. It expects a YoY decline of 2.3 percent and a sequential decline of 26.8 percent in the standalone revenues for the company.

Business segment performance

Among other performance metrics customer conversion and ticket sizes grew marginally YoY, while walk-ins saw minor decline; sales from top 8 cities grew in single digits, while rest of India witnessed small declines; plain jewellery category bore the brunt of price volatility in March leading to a slight decline in sales during the quarter, but studded sales registered high single digit growth thereby partially cushioning the impact and could lead to higher margins.

The company added seven Tanishq, eight Mia and one Zoya store in Q4FY22, taking the total outlet count to 444.

The watches and wearables segment saw good traction and grew 12 percent YoY (5 percent growth on 3-year CAGR) with western and northern regions outperforming others. Titan added 24 World of Titan and 10 Helios stores in Q4FY22 taking the total count to 843.

The eyecare segment grew by only 5 percent YoY where the growth was led by Sunglasses and Frames. Caratlane grew 51 percent YoY and sales in February almost reached near the highest sales level seen last November.

Margins

The CNBC-TV18 poll estimates the EBITDA (earnings before interest, tax, depreciation and amortisation) to improve 17 percent on-year to Rs 930 crore for the quarter as compared to Rs 795 crore a year ago. On a sequential basis, however, the EBITDA is seen declining by 33.5 percent from Rs 1,399 crore recorded during the previous quarter.

EBITDA margins are likely to improve by 230 bps on year to 13.4 percent.

According to a report from Kotak, EBITDA is seen growing at 40.6 percent on-year to Rs 1,118 crore, a decline of 20 percent from the previous quarter. It forecasts the EBITDA margins to improve 300 bps to 14.1 percent which is a decline of 60 bps sequentially.

“On segmental front, we expect EBIT margin of 13.6 percent for the jewellery business; 12 percent EBIT margin for watches and 23 percent for eyewear,” a report from Kotak said.

Emkay on the other hand suggests that, “better studded mix and the recurrence of inventory gain in Q4Fy22 should lead to ~130bps improvement in EBITDA margins to 12.4 percent”.

The Titan stock ended Rs 71.65 or 2.91 percent down at Rs 2,386.55 on May 2 on the National Stock Exchange. The stock has surged 60 percent during the past one year but is trading lower by 5.33 percent during the past one month.

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