Titan Company Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Devanshu Bansal - Emkay Global Financial Services Ltd. - Analyst : Yes, sir, hi. Thanks for the opportunity and congratulations on a good growth performance in Q2. My first question is on margin in the jewelry segment there has been a 270 plus margin growth. I just wanted to understand if you could segregate this into various margin brackets. Is it like due to pressure in gold price margin, weaker revenue mix or higher promotions on making chart marketing, et cetera? So broadly, if you could help us understand the breakup of this.

Question: Devanshu Bansal - Emkay Global Financial Services Ltd. - Analyst : Yeah. That's mentioned in the PPD sir. And I also wanted to understand the reason behind this, weak sort of growth in studded, obviously, solitaire you mentioned, so if we have to divide it into two broader reasons, one is from a studded perspective, the other competition is sort of giving relatively better pricing on studded, that is one. And the second obviously is the growing noise around the lab-grown diamond. So what do you attribute this to as of now among these two reasons?

Question: Devanshu Bansal - Emkay Global Financial Services Ltd. - Analyst : Just a small follow up. What would be qualitatively the margin difference between solitaires within studded and the other smaller pieces that we sell under the studded jewelry?

Question: Devanshu Bansal - Emkay Global Financial Services Ltd. - Analyst : Understood. Okay. Thanks for taking my question.

Question: Tejash Shah - Spark Capital Advisors(India) Private Limited - Analyst : Hi, thanks for the opportunity. And the first question is most categories, consumer categories at large, being soft this quarter except jewelry has actually done well at large even as a sector. How do you gauge consumer sentiment? Any early read on festive or wedding demand trends also?

Question: Tejash Shah - Spark Capital Advisors(India) Private Limited - Analyst : And the same you would extend to wedding jewelry demand also?

Question: Tejash Shah - Spark Capital Advisors(India) Private Limited - Analyst : Yeah, a small follow up there. So with high gold prices, are you seeing any shift towards lighter and more affordable jewelry or any preference trending across price points or regions you can share? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call

Question: Tejash Shah - Spark Capital Advisors(India) Private Limited - Analyst : Sure. And the last one on lab grown diamond. So we have been waiting and watching our monitoring phase for the last few quarters as you called out. Any early findings on consumer interest now or any pilot initiatives under the way that you can share?

Question: Tejash Shah - Spark Capital Advisors(India) Private Limited - Analyst : That's all from my side. Thanks and all the best.

Question: Avi Mehta - Macquarie Research - Analyst : Yeah, hi team. Thanks for the opportunity. Just on the margin front. First, we have seen the first half at almost about 11.3% adjusted for this custom duty. Could you would you still look at 11.5% to 12.5% for the year? Is that a range that we can kind of -- how should we look at FY25 if you could give us some sense?

Question: Avi Mehta - Macquarie Research - Analyst : Got it, sir. Perfect clear and just a second question is on again on lab-grown diamond. I hear you clearly on the consumer adoption. I just wanted to appreciate that within the Tata Group, some of one other company has launched lab-grown diamond. Does that in indicate or preclude our, any possible entry by us or how should we look at that or would love to hear your thoughts on the same?

Question: Avi Mehta - Macquarie Research - Analyst : Got it, sir. And sir, just to clarify if I heard your comment that correctly, the current performance of non-solitaire started jewelry reaffirms our expectations. That's the right read through on how we look at lab grown?

Question: Avi Mehta - Macquarie Research - Analyst : Perfect, sir. Thank you very much. I'll come back.

Question: Avi Mehta - Macquarie Research - Analyst : And sir, any share that you could share of how roughly it would be salient for us than the large diamonds because I would assume it would be a little smaller share?

Question: Avi Mehta - Macquarie Research - Analyst : Thank you very much. That's all from my side.

Question: Jay Doshi - Kotak Securities - Analyst : Yeah, hi. Thanks for the opportunity. Just clarifying on the guidance for EBIT margin. The earlier guidance was 11.5 to 12.5 for the console jewelry EBIT margin. So, has this now changed to 11 to 11.5? Basically, it's console jewelry EBIT or stand alone?

Question: Jay Doshi - Kotak Securities - Analyst : Over. So if I look at the first half, numbers, recurring, consolidated margin is 10.5 for jewelry business and for you to sort of deliver 11.5, it means the second half should be 11 at the lower and second half should be 100 better than first half. So are there any sort of efficiency levers or any trends that you're sort of seeing in the market that gives you confidence of improvement in second half margin improvement versus what we've seen in first half? And I'm referring to recurring, excluding one time impact of import.

Question: Jay Doshi - Kotak Securities - Analyst : And is it possible? So when we look at this quarter's margin of 11.4 versus 14.1 last year, there is a 270 basis point drop. And when we look at 1Q, the drop was actually not that much on a YoY basis and 1Q was a much weaker quarter from top-line growth or operating leverage perspective. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call So is it possible to break down this 270 basis point recurring EBIT margin drop this quarter? How much of that is attributable to that weakness on the studded side or mix? And how much of that is basically competitive pressure in the gold business?

Question: Jay Doshi - Kotak Securities - Analyst : As a thumb rule, my understanding was 100 bits, drop in studded share would account for about 20 bits impact on margin. Is that correct? Or you think it should, it will be much higher?

Question: Jay Doshi - Kotak Securities - Analyst : Yeah, understand. Okay, thank you so much. I'll get back in touch. Thanks a lot.

Question: Nihal Mahesh - Ambit Capital Pvt Ltd - Analyst : Yes, good evening. I have a first question on the demand. In the press release, you mentioned that there was strong momentum till mid September. Just wanted to clarify that after the initial spot that you saw post the duty cut has the demand trend sustained or there has been a sharp moderation? Just wanted to clarify that part first.

Question: Nihal Mahesh - Ambit Capital Pvt Ltd - Analyst : Understood that's clear. The second question was again on the LGD bit. As you also highlighted based on what we've discussed in this call, that the demand for LGD is mainly the sub INR1 lakh price point at this point in time. And more than Tanishq, I think, CaratLane operates in that point with a very high share of solitaires. So is it right to say the kind of a customer that CaratLane serves and also say LGD becomes more fashion oriented that that is the brand which could see maybe more migration of customers and maybe that's the brand where LGD launch would make sense? Just your thoughts on that.

Question: Nihal Mahesh - Ambit Capital Pvt Ltd - Analyst : I mean, I'm sorry (multiple speakers).

Question: Nihal Mahesh - Ambit Capital Pvt Ltd - Analyst : Sir, I just correct. Maybe it is not about this quarter and not about the impact, but just that would that customer be more relevant from an LGD perspective? Let's put it that way rather than a Tanishq customer?

Question: Nihal Mahesh - Ambit Capital Pvt Ltd - Analyst : Understood. So, thanks for that. That was it from my side.

Question: Shirish Pardeshi - Centrum Broking Private Limited - Analyst : Hi, good evening. Thanks for the opportunity. Just two observation. Our studded ratio has come down to 30%. And in Tanishq, it has grown about 12% while in the CaratLane, what I'm reading is about the growth is about 41%. So is the nature of the business -- what I'm trying to understand is there any overlap of the customers between CaratLane lane and Tanishq? And what you mentioned is the shift which is happening from say a particular customer who's buying say less than INR1 lakh studded is now moving to CaratLane?

Question: Shirish Pardeshi - Centrum Broking Private Limited - Analyst : So the reason why I'm saying I had a first hand experience around the valley. So we went a nearby store and which was next to CaratLane. And we saw a lot of people around CaratLane and people were completely buying only gold from Tanishq. So if there is a segmentation happening within the consumer minds, that's my fear.

Question: Shirish Pardeshi - Centrum Broking Private Limited - Analyst : Okay. Just one quick follow up on jewelry. What is the new buyer contribution or new buyer growth? Because you have given total buyer growth is a 12%.

Question: Shirish Pardeshi - Centrum Broking Private Limited - Analyst : Okay. Okay. My second and last question to Superna. What is -- we are seeing that analog is doing much faster in last two, three quarters? It's double digit. So is there a particular trend or is there a particular innovation or mix we have tried to showcase to the consumer and how long this growth will continue? Do you think this is now in the base?

Question: Shirish Pardeshi - Centrum Broking Private Limited - Analyst : Yeah, I got that. Does that mean that, that 14.9% of that margin What we have shown, there is upside to this margin?

Question: Shirish Pardeshi - Centrum Broking Private Limited - Analyst : Okay. Thank you and all the best.

Question: Aditya Soman - CLSA Ltd. - Analyst : Hi, good afternoon. Two questions. So firstly, in terms of steady state margins for jewelry, what would be sort of a steady state margin? One should expect over a medium term? And has the guidance on that changed at all? And secondly -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call

Question: Aditya Soman - CLSA Ltd. - Analyst : That's correct. Yes.

Question: Aditya Soman - CLSA Ltd. - Analyst : Yeah. And the second question is on the emerging businesses, we see, I mean, the level of profitability even on a year-on-year basis hasn't improving practice more and slightly. So how do you think the trajectory on profitability plays out over the next few years and what would be the drivers for improvement?

Question: Aditya Soman - CLSA Ltd. - Analyst : All right. Very clear.

Question: Sid Anand - Bulbul - Analyst : Yeah, hi. So my first question was, you know about there's been a proposal to hike GST on luxury watches about INR25,000, I think. So what percentage of our sales would that be? And secondly, would it hamper our plans to open ultra luxury watches watch stores in here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call

Question: Sid Anand - Bulbul - Analyst : Okay. Understood. My third and last question would be, one of our biggest moat was, we were able to give a carat meter and verify people's adulterated gold back in the day. So have we -- is there any sort of pilot or any idea around identifying whether someone's jewelry is a lab grown one? Was the mind one within the store itself?

Question: Sid Anand - Bulbul - Analyst : So are you seeing on ground adulteration going up in general?

Question: Sid Anand - Bulbul - Analyst : Okay. That's interesting. Okay, perfect. Thank you.

Question: Ashish Koria - Citigroup Inc. - Analyst : Yeah, thank you for the opportunity. So the first question is on the competitive intensity. So given the steep increase in gold price, if you can highlight how the regional and local players are behaving, are they kind of giving some offer on the gold price because we also noticed Tanishq was offering discount on the gold price for the first time. And post the discount, the gold price was matching the gold price what some of the other large players offers. So that is the first question.

Question: Ashish Koria - Citigroup Inc. - Analyst : So instead of more discounts, part of the discount was routed through lower gold price. Is that the right understanding? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call

Question: Ashish Koria - Citigroup Inc. - Analyst : Sure. So that's very helpful. The second question is, just going back on the LGD part, you have seen over the years like how CZ or ADs have kind of, instead of becoming a jewelry, it basically ended up being just a fashion accessories, right? So any learnings from that or anything, I mean, maybe, when it was ramping up in India, we were in a very different zone. But any similarities or difference you see when (inaudible) it was scaling and now when LGD is scaling up? And second, given what say a website has done and maybe some other players are also doing, do you see, ultimately, lab-grown diamond just fading away as the accessories rather than really replacing it as a jewelry?

Question: Ashish Koria - Citigroup Inc. - Analyst : My point was because if you are getting in LGD in big box retailer as a consumer, you will not necessarily see it as a jewelry, right? It ultimately become a fashion accessories.

Question: Ashish Koria - Citigroup Inc. - Analyst : Sure. So this is super helpful. Just one last bit is on the custom duty impact. So last quarter, I think you called out that the total impact could be maybe between INR500 crore to INR550 crore and given that the gold prices has actually moved up, my understanding is the impact could be slightly lower than that. So is it significantly lower to call it out separately that instead of INR550 crore, the total impact could be lower? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call

Question: Ashish Koria - Citigroup Inc. - Analyst : Sure sir. This is super helpful. Thank you so much.

Question: Saurabh Patwa - Quest Investment Advisors Private Ltd. - Analyst : Thanks for the opportunity, sir. So just wanted to have your thoughts on. So with the gold rising, gold prices and lack of commensurate pricing increase in diamonds, in fact, it has been falling. Do you see rise of 18 carat and below kind of jewelry to make the products more in terms of your in terms of most of the dwellers making those products affordable as well as margin maintain their margin for the standard value? Is this could be a trend we could see as we move ahead?

Question: Saurabh Patwa - Quest Investment Advisors Private Ltd. - Analyst : Studded, yeah, largely for studded. So that's how you will make the light jewelry more lighter as well as your -- the mix for your diamond and gold mix could be for the proportion in terms of value could be maintained. Unidentified Company Representative There is actually -- this is (inaudible) from CaratLane. There is actually enough evidence, especially in the northern region and the western region, the high value jewelry of diamond has moved to foot in character and it has happened over a period of time and it is actually a substantial segment of the higher end of diamond jewelry.

Question: Saurabh Patwa - Quest Investment Advisors Private Ltd. - Analyst : And just second question on the, when you highlighted there is a price fall in the solitaire. How does it work for the smaller diamonds which we use for studded jewelry? How is the pricing being there? While you may not, while selling, you may not be explicitly mentioning that. But for from your buying perspective, those diamonds, how the pricing been? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 11:00AM, TITN.NS - Q2 2025 Titan Company Ltd Earnings Call

Question: Saurabh Patwa - Quest Investment Advisors Private Ltd. - Analyst : And this is and lastly just a quick clarification, You highlighted that you expect around INR280 crore of pre-loss because of custom duty. Is this included in your margin guidance?

Question: Saurabh Patwa - Quest Investment Advisors Private Ltd. - Analyst : Floor in quarter three. Understood. Thanks a lot sir and all the best for the coming quarter.

Question: Sheela Rathi - Morgan Stanley - Analyst : Yeah, thanks for taking my questions. So first question was actually just in connection to the previous question. So what was the key reason for the epic margin improvement for this quarter? And should we expect the trend to continue to improve? Unidentified Company Representative Yes. Hi. This is part of the reason is about the sales growth that has been significant. Second reason is also we have been able to hold the studded ma margin and there has been also some marginal gain that would have come to the price of procurement, et cetera. All these three. And the cost front, I think we have managed to contain our cost all put together would have seen 1% plus debt over last year and it is expected to be better.

Question: Sheela Rathi - Morgan Stanley - Analyst : And if I may ask, can a customer who owns diamond jewelry or studded diamond jewelry or a solitaire? Can they exchange it for gold jewelry? I mean, is that okay?

Question: Sheela Rathi - Morgan Stanley - Analyst : And just one final question, with respect to inventory, I mean, attributed the customs duty related inventory loss. But will we have any inventory loss with respect to solitaires in the upcoming quarters?

Question: Sheela Rathi - Morgan Stanley - Analyst : All right. Thank you very much.