Titan Company Q1 FY27 earnings call

Titan Company Limited reported a 'fantastic quarter' in Q1 FY27, characterized by 'all-round growth across all businesses, brands, and subsidiaries,' including 'good volume growth and a buyer growth.' Management highlighted that despite a 'not so favorable' operating environment, the results were strong. The company also noted 'a certain positivity so far in the last 4 months,' encompassing July, indicating sustained positive momentum.

The quarter's financial performance was significantly influenced by one-time^📎 gains. A customs duty rate increase from 6% to 15% resulted in a consolidated realization of ₹407 crores, with ₹386 crores attributed to Tanishq Mia Zoya and ₹21 crores to CaratLane. Additionally, accounting MTM in inventory provided a 75-80 basis point uplift to the jewellery division's EBIT. Management explicitly stated these gains are 'likely to reverse in the coming quarters^⏳,' with the normalized EBIT margin for Tanishq Mia Zoya, after adjustments, standing at 10.9% for the quarter.

The jewellery segment experienced a 'softness in consumer sentiment for about 3 weeks' in May due to various factors including Adhik Maas and customs duty changes. However, demand 'started picking up' by early June, with weddings restarting post-Adhik Maas, suggesting a deferment of purchases rather than a permanent loss. The 'resurgence of studded' jewellery, which began in Q4 FY26, continued robustly into Q1 FY27. The company's 'cash for gold' exchange scheme, launched in June, is designed to be 'margin neutral' due to internal deductions.

The Damas Core business recorded losses in Q1 FY27, primarily attributed to the 'current situation of war' in Dubai and Saudi, which led to reduced footfall and lower ticket sizes. In contrast, the 'rest of the portfolio of international business, except Damas,' is achieving mid-single-digit EBIT margins of 5-6%. Management anticipates the 'overall portfolio' of international business to deliver 'positive EBIT performance for the full year,' with Damas's recovery dependent on the normalization of the geopolitical situation.

Both TEAL and CaratLane subsidiaries are on a 'significant growth path,' with management prioritizing 'top line growth' for both. CaratLane achieved an EBIT margin of 9.6% in Q1 FY27 and is expected to 'gradually go towards double-digit EBIT margin,' targeting 'towards 10%.' TEAL's normalized margin is projected to 'gradually gravitating towards 12% to 15%, 16%' in the long term, with the current year potentially seeing higher margins.

Competitive intensity in the plain gold jewellery segment remains high and has not eased, particularly in certain geographies like Gujarat, where it has been increasing over the last 2-3 years. Gold price volatility and 'confusing news' in May led to some consumers delaying purchases, especially for plain gold, causing 'softness towards the end of July.' However, natural diamond prices, for both solitaires and small diamonds, have shown 'more stability,' which is positive for the studded segment.

Titan reiterated its commitment to 'double-digit aggressive growth' and achieving its 'FY30 goals,' emphasizing the 'huge headroom' for growth across all businesses. Key growth drivers include formalization, India's growth story, the expanding middle-income segment, portfolio diversification, and premiumization. Management expressed confidence that even with stable or declining gold prices, the company can achieve healthy growth by acquiring buyers and leveraging its strong brand and market position.