Tata Group’s flagship consumer lifestyle company, Titan Ltd., is poised to announce its financial results for the second quarter (Q2) of the fiscal year 2024-25 on Tuesday, November 5. Investors and market experts are anticipating strong performance, with a likely double-digit growth in revenue, primarily driven by the company’s jewellery division.
Titan, which operates across a diverse portfolio of businesses including jewellery, watches, eyewear, and wearables, is expected to report consolidated revenues in the range of ₹13,100 crore to ₹13,500 crore for the July-September 2024 quarter. This would represent a year-on-year (YoY) growth of 12% to 15.7%, along with a sequential rise of approximately 8% to 12% over the previous quarter. Moreover, Titan’s net profit for Q2FY25 is likely to show an 8% to 10% increase YoY, with estimates ranging between ₹870 crore and ₹1,050 crore.
Jewellery Division to Drive Growth
The jewellery business is projected to be the key driver of Titan’s overall revenue growth, with a strong recovery anticipated after a relatively subdued first quarter. In particular, experts expect Titan to report healthy double-digit growth in the jewellery segment, thanks to a favorable macroeconomic environment and the government’s recent move to slash customs duties on gold imports. The Union Budget’s decision to reduce the customs duty from 15% to 6% has created a positive ripple effect in the industry, with consumers expected to take advantage of lower gold prices.
Titan’s jewellery division, which includes the company’s flagship Tanishq brand, is set to benefit from this policy change. In its business update for the second quarter, Titan highlighted that it had opened 24 new stores during the period—11 under the Tanishq brand, 12 for Mia (Titan’s affordable jewellery brand), and 1 Zoya store in Abu Dhabi. The company had also reported an estimated 25% rise in domestic operations for the jewellery division during Q2 FY25, signaling robust consumer demand.
Watches & Wearables Segment: Revenue Growth Amid Expansion
The Watches & Wearables segment is another area of focus for investors as Titan continues to expand its footprint in this market. The company opened 34 new stores in this category during Q2FY25, further cementing its position in the premium segment. Experts will be closely watching the impact of these new store openings on revenue growth and margins, particularly as Titan has seen a 19% YoY growth in the domestic business for this segment in the September quarter.
The continued trend of “premiumisation” in the market, where consumers are opting for higher-priced, luxury watches and wearables, is expected to have driven this growth. Investors will be keen to understand how Titan’s diverse offerings, including premium brands like Titan and Fastrack, contributed to this rise in revenue.
Eyecare and Emerging Businesses Maintain Steady Growth
Titan’s Eyecare and Emerging Businesses divisions are also expected to show steady growth in Q2. The Eyecare business, which includes popular brands like Titan EyePlus, is estimated to have seen a 6% YoY growth in domestic operations during the quarter. This marks a continuation of the positive growth trajectory seen in previous quarters.
Meanwhile, Titan’s emerging businesses, which include the Taneira (a saree and ethnic wear brand) and Fragrances & Fashion Accessories, are expected to report robust growth, with high-teen percentage increases in revenue during Q2FY25. These newer segments are increasingly contributing to Titan’s overall diversification strategy, and the continued growth of these businesses will be closely monitored.
Pressure on EBIT Margins Due to Store Expansions
Despite the strong revenue growth anticipated across several business segments, experts believe that Titan’s earnings before interest and tax (EBIT) margins may remain under pressure in Q2 due to aggressive store expansions. Titan has opened a total of 75 new stores in Q2, spanning across all business verticals, including jewellery, watches, and eyewear. While these new stores will drive revenue, they also entail higher operating expenses, particularly in the form of rent, staffing, and inventory costs.
Additionally, the jewellery segment’s EBIT margins could face headwinds as a result of increased competitive intensity in the market, which has led to a reduction in gold price premiums. The continued rise in gold prices may also contribute to the rationalisation of making charges, which could put further pressure on profit margins.
A Look at Titan’s Q1FY25 Performance
Titan’s first-quarter results for FY25 showed mixed performance, with revenue growth but a slight dip in profit. The company reported an 8% YoY growth in standalone revenue for Q1, reaching ₹12,053 crore. However, its profit after tax (PAT) for the quarter dropped by nearly 1% YoY to ₹770 crore. The jewellery segment, which remains Titan’s core business, saw a 9% YoY increase in total income, reaching ₹9,879 crore, with an EBIT margin of 11.2%.
The Watches & Wearables division reported a strong 15% YoY increase in total income, amounting to ₹1,021 crore. The EBIT for this segment stood at ₹115 crore, with a margin of 11.3%. Despite these positive figures, the slight dip in PAT raised some concerns about rising costs and margin pressures.
Market Reactions: Titan’s Stock Performance
Ahead of the upcoming Q2 results, Titan’s stock has seen a slight uptick in value. Shares of Titan Ltd. traded 0.6% higher at ₹3,241 per share on the National Stock Exchange (NSE) as of 10:00 AM. However, despite this recent uptick, Titan’s stock has been under pressure in 2024. The shares have declined by more than 13% year-to-date and have fallen by 0.21% over the last 12 months. Additionally, the stock has dropped more than 11% in the last month, as concerns about margin pressure and market volatility have weighed on investor sentiment.
What to Watch for in Titan’s Q2 Announcement
As Titan prepares to announce its Q2 results, investors and analysts will be closely watching for commentary on several key areas:
Demand Outlook: Insights into the demand scenario for Titan’s various business segments, especially jewellery, will be closely monitored. Analysts will want to understand whether the positive trends observed in Q2 can be sustained in the coming quarters.
Margins: While revenue growth is expected across the board, margins could face pressure from the aggressive expansion in store count, rising gold prices, and competitive pressures in the jewellery market. Titan’s commentary on margin expectations will be a key factor for investors.
Impact of Gold Duty Cut: The effect of the Union Budget’s decision to cut customs duties on gold imports will be scrutinised. Analysts will want to know whether the policy change has had a tangible impact on consumer purchasing behavior and Titan’s sales volumes.
New Store Openings: The impact of new store openings on Titan’s growth trajectory will be a key talking point. With 75 stores opened in Q2, Titan’s strategy to expand its physical presence in both domestic and international markets will be closely evaluated.
Growth in Emerging Segments: Titan’s non-traditional businesses, such as EyeCare and Emerging Businesses (Taneira, Fragrances), are expected to contribute significantly to overall growth. Investors will be keen to learn more about the performance of these segments and their potential for future growth.
Conclusion
Titan Ltd.’s Q2 results are expected to reflect strong growth driven by its jewellery business, along with steady performance across its other business segments. While the company faces some pressure on margins due to increased store expansions and rising gold prices, its diversified portfolio and ongoing expansion strategy position it well for long-term growth. Investors will be watching closely to see how Titan navigates these challenges and whether its growth trajectory can be sustained in the coming quarters.
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