Titan Company Ltd Q3 2025 Earnings Call Transcript

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

Question: Aditya Soman - CLSA - Analyst : Hi, good morning. So two questions from me. Firstly, on jewelry. Can you give us a sense of how you expect sort of margins to pan out? We've seen a sort of a significant bump up in studded growth in the quarter. But if I look at the margins relative to the growth, at least the EBIT growth still remains a little bit lower. So I'm wondering if we see a further affliction in the EBIT growth in 4Q normalized for this one-off inventory impact of the customs duty. And the second question on the analog watches, I think again, very strong growth here. Do you see yourself sort of also building out sort of more lower end analog watches to drive faster and sort of more broader growth in that category?

Question: Aditya Soman - CLSA - Analyst : And maybe just follow up on that.

Question: Aditya Soman - CLSA - Analyst : Yeah, sure.

Question: Aditya Soman - CLSA - Analyst : That's very clear. And just one follow-up, Ajoy. So the diamond prices on your own burdens have come off, right? I mean, on diamond specifically, I mean I understand gold mix going up and the price of gold going up bringing down.

Question: Abneesh Roy - Nuvama Wealth - Analyst : My first question is on the emerging business. Ideally for any company, emerging business would be the fastest growth. And perfectly for you, it seems to be the slowest growth. And we have seen only one store addition in Panera, and Panera growth is flat. So is Panera, the only reason behind the slow growth? And in Panera, do you need to go back to the drawing board in terms of pricing, design, et cetera? And would you go slow until you find out what's happening there? Because in marriage season, I believe Panera should have seen a good growth. Unidentified Company Representative Abneesh, thank you for that question. (spoken in foreign language) Yes. So you're right. Panera sales growth was flattish. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call But if you look at our retail growth, we grew by 30%. Our buyer growth was 38%. The reason why it looks flattish is because last year, we opened seven L3 stores in quarter three. And whereas this year, we opened only one L3. And we also allowed for some inventory correction in some L3 stores. Having said that, we have also introduced a lot of new products at accessible price points across saree and non-saree segment, which was received very well, which was received very well by our customers, both existing and new and that actually brought down our AUCP, but it delivered the required buyer growth, though I think we could have done better if we had gotten more new buyers. So that's what we are working on right now. We opened only one store in this quarter, but we are continuing to -- we'll continue to open stores. Now we are focusing more on metro and Tier 1 cities, not going to smaller towns. So there has been a small change in our strategy, and we like to populate more stores in the existing and operational cities.

Question: Avi Mehta - Macquarie Research - Analyst : So I just wanted to kind of follow up on the saree jewelry -- on the jewelry margin aspect. So where are we in the journey for normalization of the saree margin? And how long do you see that kind of taking to kind of reach there? Because you did allude towards making adjustments in the product portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call And where I'm trying to get to is 11%, 11.5%, when do you see it sort of moment to 11.5% to 12%, which historically would be the margin range

Question: Devanshu Bansal - Emkay Global Financial Services Ltd - Analyst : Congratulations on a very good quarter. Ajoy, jewelry, SSG has clearly improved from 15% in Q2 to 22% in Q3. We have not seen a circular uptick in SSG trends for other recent years where they are less similar or slightly lower versus Q2. So just wanted to check on what types of actions have you taken to see this growth improvement? And how sustainable are these growth initiatives?

Question: Devanshu Bansal - Emkay Global Financial Services Ltd - Analyst : Second, I wanted to understand this, there has been a sourcing loophole that has been plugged by the government budget was being imported in the form of alloy. Do you feel this was happening in pretty large quantities which can lead to some reduction in competitive intensity from a gold pricing point of view?

Question: Devanshu Bansal - Emkay Global Financial Services Ltd - Analyst : Understood. And otherwise, Ajoy, generally, are you seeing some rationality in competition from a making charge perspective, given that gold is now being hallmarked and certain as we discuss major routes of gold -- being closed by the government. So any general otherwise, are you seeing some rationality from making charge pricing 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. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call

Question: Videesha Sheth - Ambit Private Limited - Analyst : I hope I'm audible. The first one was on the studded and sorry to hop on this again. But for Titan, the studded mix has been under pressure. I appreciate that it could be playing out like gold size is driving this. But when we look at your close the statement has been stable for that. I understand that it might be difficult to comment on compression, but just wanted your thoughts on what could be driving this divergence?

Question: Videesha Sheth - Ambit Private Limited - Analyst : Understood. Understood. That helps. And second was just two small questions on CaratLane. Want to just a clarification, but do you stick to the potential guidance for CaratLane which was given out during your annual investor meet? And how do you see the trajectory over?

Question: Videesha Sheth - Ambit Private Limited - Analyst : Sure, sure. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call

Question: Videesha Sheth - Ambit Private Limited - Analyst : And the second is on CaratLane. Is it possible to share the catchment growth for 3Q or the nine months given that FSG could be depressed due to higher store density?

Question: Videesha Sheth - Ambit Private Limited - Analyst : Is it possible to share the catchment level growth for either third quarter or nine months given that SSGs could be depressed due to the higher -- density, the plaster level growth or the catchment growth. Our overall growth in quarter three has been quite good. And I can give you some indication of our like-to-like store growth, which is also very good, the 16% in quarter three and previous quarter is 21%, which is significantly higher than what happened in the previous four or five quarters. Yes.

Question: Sheela Rathi - Morgan Stanley - Analyst : So my first question was, you sounded very optimistic on the trends which we have seen this quarter. So any call outs here in terms of geography-wise performance? And Ajoy, you also mentioned that buyer growth is important for us. So what is the mix of new buyers and existing buyer growth? And is there a divergent trend in studded and gold jewelry buying for a new buyer and existing buyer? And is it fair to say that when you buy gold coins, it's generally the new buyer who is buying more of these gold coins because you also said that we had some very strong trends there. That was my first question.

Question: Sheela Rathi - Morgan Stanley - Analyst : Understood. And my second and final question is, I mean, Venkat made the point on how on a monthly basis, the trend change on the pricing side and currency. I just want to understand how should we think about the competitive landscape? Is it a monthly affair, a quarterly affair in terms of the trends which you see, especially from the independent and regional jewelers? Or is it more like a regular phenomena where you can see a trend and that doesn't change very quickly. And also if you can just guide us on how the landscape has been, especially in the recent quarter.

Question: Jaykumar Doshi - Kotak Securities (Institutional Equities) - Analyst : My first question is on demand. You've had a good 25% growth for the past two quarters. Do you think that kind of growth rates can sustain for a few more quarters, especially because gold prices are up 25%, 30% YoY. That's my first question. Second is on this 11% to 11.5% EBIT margin guidance. Is it at a consolidated level for jewelry business or a stand-alone level? And third is, although you did mention about that your focus is on driving the absolute EBIT growth in the jewelry business given that gold price increases are much ahead of expectation, so you are overshipping on the growth plans versus what you had given guidance at your investor meet. But at the EBIT level, EBIT growth, what is that target in your mind that you sort of are internally sort of thinking? What's the right EBIT growth now that one of the EBIT margin seems to have settled or stabilized at a level. So those were my three questions.

Question: Jaykumar Doshi - Kotak Securities (Institutional Equities) - Analyst : Sorry if I may -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call

Question: Jaykumar Doshi - Kotak Securities (Institutional Equities) - Analyst : Sure. And sir, my question on margin?

Question: Amit Sachdeva - UBS - Analyst : A good set of numbers in jewelry. My question is, I mean, alluding to your conjecture on that. There's a price war of some sort which emerge in gold price. And given that context, I think 28% in the second hand and 25% kind of jewelry growth seems very impressive. And so congratulations for that. The next question is that is it -- if the market is now in new pricing equilibrium of some sort that you're comfortable growing in that context? Or incrementally as the gold price is very volatile. Now this frontier of so-called price war can shift in to making charges because as the gold price increases, somebody can obviously theoretically offer discounts and making charges and with regards to another reaction and nonreaction. So I just want to understand as we grow at the margin in the marketplace, the linked question is that do you feel comfortable with pricing equilibrium that exists between the organized players and reasonable players which are sort of compete with you? That's question number one. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call

Question: Amit Sachdeva - UBS - Analyst : So in that sense, can I ask for how the Q4 is evolving so far and studded to work and could you comment on that a bit?

Question: Amit Sachdeva - UBS - Analyst : Got it, got it. My second and my last question is basically -- is a business model question. Given so many moving parts are there, studded mix, diamond pricing, customers' willingness to pay diamond to gold price volatility and competitiveness, all forces are sort of coinciding at this point. But the question then is that as you look to maximize revenue growth and keeping the margin in a respectable zone, which is now 11 to 11.5, my question is, would you have sort of threshold margin that, at a business model level, we will not go below, say, 10? And that's the margin is the lowest for us and we design the economics around that? Or is it something that threshold doesn't exist and you will maximize it. But how one should think about what could be floor of that strategy? And what could be the cap on that strategy?

Question: Tejas Shah - Avendus Spark Institutional Equities - Analyst : Couple of questions on jewelry. So in our channels, we are seeing that a new competitor is securing good locations near our stores. Now our store performance in this area is in line with division's average or weaker. And I just wanted to check, Ajoy, on your previous comment. Have we tested removing our gold price premium? And wherever we would have done that, does our consumer or customer recruitment actually goes much higher than the average?

Question: Tejas Shah - Avendus Spark Institutional Equities - Analyst : Got it. And secondly a last, one source of volatility coming from tariff is also that we picked up from media news item that gold lease can actually get impacted globally. So any early read through there. I know it's volatile, but any read through there? Unidentified Company Representative Yes. So one of the things that we are seeing is in the last 1 month phenomena is a slight increase in the gold on lease rates indicated by the banks. But again, there is also a supply situation that they are also trying to address. So we need to see, therefore, over the next few months how the supply situation of gold lays out and in that context how these rates finally stabilizes. But definitely, the initial indications are that the gold on lease rates could go up. It's just that we need to wait for a month or two to understand how the supply and therefore, the pricing will play out.

Question: Tejas Shah - Avendus Spark Institutional Equities - Analyst : Got it. Clear. All the best for coming quarters.

Question: Kunal Vora - BNP Paribas Exane - Analyst : Are you seeing any impact of the LGD stores which are coming up? I know on a national level, there will not be any impact. But like in specific locations, for example, Borivali, I see that there are 8, 10 stores, LGD selling within kilometers from Tanishq and CaratLane. So are you seeing any impact on those stores in terms of credit business of Tanishq or on the sales of CaratLane?

Question: Kunal Vora - BNP Paribas Exane - Analyst : And second quick one on the new income tax change, there will be higher disposable income, and it also looks like both people will be willing to disclose slightly higher income, maybe should have like 12 lakhs. Do you see this benefiting the organized jewellers? Do you think assuring pan card has been an issue for certain customers?

Question: Kunal Vora - BNP Paribas Exane - Analyst : Understood. And like many would not be having much of reported income. It could go up from the business class? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 2:45AM, TITN.NS - Q3 2025 Titan Company Ltd Earnings Call

Question: Harit Kapoor - Investec - Analyst : I just have two quick ones. One was on -- so if you look at all your format performance this quarter, so it's probably the first quarter in seven, eight quarterswhere everything in terms of sales value growth has been in double digit. And even the seven, eight quarters back, had a low-ish kind of [COVID] base. Apart from your internal initiatives that you've articulated on this call, I mean, do you believe that this -- the segment price points that you're operating at in [Juzi] and even some of the mid premium, et cetera, on analog watches? There is demand trends have -- I won't say inelastic, but they have been significantly more stable and likely to continue to be so as compared to a lot of other consumption spaces because this dichotomy of double-digit growth across your format is something that you're not seeing in most other consumption spaces?

Question: Harit Kapoor - Investec - Analyst : Second was CaratLane on last two quarters, on a YoY basis, the margin expansion has been very strong. Would you attribute this largely to strong same-store sales growth, strong like-for-like growth, it has come back, which it is guiding operating leverage? Or what are the other factors kind of play this.

Question: Vivek Maheshwari - Jefferies - Analyst : Just one question. When you mentioned about diamond prices being stable, but when we talk to industry players, my understanding, and correct me if I'm wrong, but through the course of the last second half of this quarter, the diamond prices actually continued to slow down. Is that understanding not correct?

Question: Vivek Maheshwari - Jefferies - Analyst : Got it. And just a follow-up. So when you talk about in the last few years, you have taken efforts to, let's say, bring some level of clarity with the -- on the gold side, in case of diamond, is there a micromarket to also look at because there aren't that many players in the market on the diamond side. So how do you ensure that you are competitive? Or given that you are like you are used to very little competition, you in a way determine the price of the jewelry, the studded jewelry.

Question: Vivek Maheshwari - Jefferies - Analyst : Got it. And last bit on this one only. So sir, is -- so let's a particular piece of studded jewelry. Will it -- the price will be the same across the country or it can change based on the micro market and the competition in that market?