"Titan Company Limited Q1 FY23 Earnings
Conference Call"
August 05, 2022
MANAGEMENT: | MR. C. K. VENKATARAMAN | - MD, TITAN COMPANY LIMITED |
MR. ASHOK SONTHALIA | - CFO, TITAN COMPANY LIMITED | |
MS. SUPARNA MITRA | - CEO, WATCHES & WEARABLES | |
DIVISION | ||
MR. SAUMEN BHAUMIK | - CEO, EYECARE DIVISION | |
MR. AJOY CHAWLA | - CEO, JEWELLERY DIVISION | |
MR. MANISH GUPTA | - CEO, FRAGRANCES AND FASHION | |
ACCESSORIES DIVISION | ||
MR. AMBUJ NARAYAN | - CEO, INDIAN DRESS WEAR DIVISION |
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Titan Company Limited | |
August 05, 2022 | |
Moderator: | Ladies and gentlemen, good day and welcome to Titan Company Limited Q1 FY23 Earnings |
Conference Call. As a reminder, all participants' lines will be in the listen-only mode and there | |
will be an opportunity for you to ask questions after the presentation concludes. Should you need | |
assistance during the conference call, please signal an operator by pressing '*' then '0' on your | |
touchtone phone. Please note that this conference is being recorded. | |
I now hand the conference over to Mr. C.K Venkataraman - Managing Director, Titan Company | |
Limited. Thank you and over to you sir. | |
C. K. Venkataraman: | Thank you very much. Thank you all for joining in. It has been an exceptional quarter for the |
company and I must thank all customers of the Company, all employees, all partners and their | |
employees and all the leaders and managers of Titan Company and its subsidiaries CaratLane | |
and TEAL for meeting all the external challenges head-on and delivering a very very satisfying | |
result on all fronts including of course financial performance that we are here to discuss and I | |
would like to straightaway jump into the Q&A. So please start with the first person in line. | |
Moderator: | Thank you very much. We will now begin the question-and-answer session. The first question |
is from the line of Avi Mehta from Macquarie. Please go ahead. | |
Avi Mehta: | Hi sir, congratulations on this performance. I had two questions. First was after this sharp custom |
duty increase there has been a lot talk about the consumption scenario as well as the competitive | |
landscape changing. Do you see that as a risk in your ability to reach that 2.3-2.4 times over | |
FY18 to FY23 that you were earlier kind of gunning for? | |
Ajoy Chawla: | Hi Avi, Ajoy here. We are not seeing too much of a sharp impact of that. Gold prices have kind |
of remained in the 5,000-5,100 range and that is what matters to the customer. I do not even see | |
any significant change on the nature and structure of competitive framework. I think everybody | |
is facing it. It is okay, the larger piece if at all that we need to think about going forward over | |
the next few months, how is the entry point customer who is possibly more inflation challenges | |
etc., that may be more important than this gold price increase because gold price increase has | |
not been significant. It has not been a big jump. | |
Avi Mehta: | Okay. The custom duty is not a big deal and sir you said I did not understand how the entry |
customer so is there any signs of concern that you are witnessing is that what you are | |
highlighting. | |
Ajoy Chawla: | We've seen the buyer growths have been very good but we are seeing a greater traction on the |
higher ticket sizes and higher values and also greater traction on studded on the lower price | |
points on gold specially those who are looking at below 10 grams, below 15 grams, everyday | |
wear. There is some creeping level of, there is still growth there, there is no question but yes, it | |
is not as high as the rest of the segments have shown, but it is very early days because we are | |
not sure how that, because during Akshaya Tritiya these customers came in good numbers, then |
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August 05, 2022 | |
it has been a little muted. I think they will come whenever there is festive season and there is a | |
reason to purchase that is the understanding that we are getting. And therefore, hopefully August | |
month where there is a lot of, many festivals, we are expecting those customers to also come in | |
and again during season we will expect them to come. This is largely on the low-price band in | |
gold, otherwise everywhere it is a, but it is still a growth, I must just clarify it is still a growth, it | |
is not that there is a serious stress and all that. | |
Avi Mehta: | And sir what share would this be? Sorry just trying to understand this is something that you |
think can tilt the growth in a reasonable manner, | |
Ajoy Chawla: | No, it will not tilt the growth. |
Avi Mehta: | And sir the second question was across the segments this quarter has been very healthy in terms |
of margins, has there been any one-off in the margins that we should be aware of or is this more | |
structurally better more a margin profile that we should be witnessing because of the initiatives | |
that you have taken post COVID. | |
Ashok Sonthalia: | Avi, across businesses I would say, all the businesses have different operating leverages and |
Watches and EyeCare have very high operating leverage and which is getting reflected with the | |
growth. As far as Jewellery is concerned, there is I would not say one-off but there is some gain | |
which came through 2-3 elements. One is of course, the diamond prices, the other one is of | |
course in this quarter, we had some spot gold purchase and forward contango which is sitting in | |
AGC but through other income, it gets compensated and of course operating leverage in | |
Jewellery business also. The Jewellery business could have the benefit of I would say 80-90 | |
basis point because of that rest all businesses have performed well, grown well and that is what | |
is getting reflected. | |
Avi Mehta: | Sir, if I may just try to understand this forward contango, we hedge, so logically, there should |
be from other income including there should be no margin benefit, right sir? | |
Ashok Sonthalia: | Other income, I do not know which level of margin you are looking at, other income including, |
yes, you are right. There are sometime differences between contango and opportunity cost but | |
that is very minimal. There should not be any difference, you are right. | |
Avi Mehta: | So, it is more leveraged and diamond price based which is what you are still seeing. |
Ashok Sonthalia: | Yes. |
Moderator: | Thank you. The next question is from the line of Abneesh Roy from Edelweiss. Please go ahead. |
Abneesh Roy: | My question is on EyeCare, very high margins, so are you seeing benefit of liquidity drying up |
for the startup businesses which compete with you, not just for EyeCare across your other | |
businesses also and so good margins is that sustainable for these kind of businesses? |
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Titan Company Limited | |
August 05, 2022 | |
Saumen Bhaumik: | Hi this is Saumen. As far as our margin structure is concerned, I think over the several quarters |
we have kind of demonstrated 64%-65% gross contribution works and to us it seems sustainable, | |
combination of house brand focus, channel mix, in-house production, India sourcing are the | |
factors that give us that view and as far as the PBT percentage is concerned and that I think in | |
the ballpark of 15+ is what we anticipate. It is the sale swing of 10% kind of significant swing | |
of your PBT percentage as you saw some quarters between 15%-20% but 15+ is what we believe | |
is sustainable and frankly I have nothing really to say about what is happening in the other side. | |
Abneesh Roy: | On the Jewellery margins, you have done very well, my question is what is driving this because |
your studded has grown in line with your other segments but if you could elaborate why wedding | |
jewellery has grown a bit slower, any concern that you see there. So here again, if the advertising | |
spends for the category now lower because in general the advertising rates are lower or the | |
industry has gone to a lower level. So, if you could elaborate on the margin front. | |
Ajoy Chawla: | Better margin delivery first and foremost is on account of operating leverage, what we are seeing |
in terms of the EBIT margin. Second, I would I say in terms of a richer product mix and when I | |
say product mix, it is not just studded and gold. We look at all different categories, there are | |
many categories, we look at even within studded there are slightly differential margins for | |
different product categories. And third piece I would say which Ashok shared in the previous | |
one, there is what he said about 80-90 basis points which is a one-off in the sense that it may not | |
remain forever, it is there in this particular quarter. So, these are three main reasons. On | |
advertising we have not cutdown, in fact our advertising to NSV is pretty much where it is in | |
fact, we have been very very prominent and very visible so we are not holding back on | |
advertising and neither it is that the rates have come down. It is pretty much, what it was. | |
Abneesh Roy: | One last, follow up and that is the last question, so 23% CAGR in jewellery is extremely good |
and of course this is one of the highest growth rates in any consumption segment. So wanted to | |
understand if you could comment on market share in three years in your view how it would have | |
moved and is it coming out because of any region-specific successes or is it because of Pan India | |
activation campaign because you have been very aggressive on innovation also. So could you | |
elaborate on these points on a three-year basis. | |
Ajoy Chawla: | On a three-year basis, I think our market share earlier we used to quote 4-5%, roughly, right now |
we are quoting at 6-7%. Also, the base has gone up, I remember, we used to talk about around | |
300,000 to 350,000 crores. Now the latest figures that I am hearing is 4.2 lakh crores. So | |
suddenly, I think market share gain in a market which has also grown is one piece. Of course, | |
part of the growth in a market is also being fueled by gold price gain, we should not ignore that | |
and in the recent past also even diamond prices have gone up. So, there is a certain ticket size | |
sitting there. But even buyer growth has been good in terms of, if I were to look at the absolute | |
value growth over FY19-20 quarter 1 is around 80% and the volume, that is buyer growth, the | |
way we look at volume is buyer growth or bill growth, if you are to take it is sitting at 26%. So, | |
it is a fairly healthy growth in transaction itself. Two things, I think, the engine that were outlined |
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August 05, 2022 | |
earlier by Venkat in the previous forums that he has done, last five years. Those engines most of | |
them are firing very well. During COVID period there was a disruption in the golden harvest | |
related pieces and therefore to that extent there has been a +/- but again enrollments have picked | |
up very well and going forward we should therefore see a good progress on that. The only | |
additions that we have added in the last couple of years. One is we brought in a renewed focus | |
on the lower ticket size what we are calling as the core. So, focusing on the lower price points | |
and lower ticket size, so that the funnel is strong because it is those people only over a period of | |
time will migrate on to becoming the high value customer. The second piece is digital that has, | |
last two years has built up as a solid engine, even now it is contributing about 6% of our topline | |
and the third piece which is helping us. It is a slightly modified form of an earlier engine which | |
is winning in low share markets now we are in fact taken up many more markets and we are | |
working across many different states. So South for example, we have seen very good traction, | |
parts of East, we have seen exceptionally good traction as well. So yes, in the three-year period | |
if I would say, South has really pulled up because of these strategic initiatives and also parts of | |
East. | |
Moderator: | Thank you. The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises. |
Please go ahead. | |
Rakesh Jhunjhunwala: | My question is, how is Fastrack growing, you have introduced handbags and all that. |
C. K. Venkataraman: | The women's handbags? |
Rakesh Jhunjhunwala: | Yes, in the Fastrack products. |
Suparna Mitra: | Hi Rakesh, Suparna here, Fastrack watches have grown quite well in the quarter when |
comparison to the previous quarter 1 of last year, we have grown by 120% and the big thrust has | |
been in the lower price economy entry price products in fact we did a big campaign with | |
Stunnerz which is the entry price product. Fastrack Smart watches continues to do very well. | |
We have a big winner in Fastrack Vox as well as we have two new Fastrack Smart watches in | |
this quarter 1. So, it has been a very good run for Fastrack Smart watches. They have really | |
picked up a lot of traction. | |
C. K. Venkataraman: | And Rakesh we are also very excited about the Fastrack brand in the EyeCare category. |
Saumen Bhaumik: | We have just opened our second Fastrack prescription eyewear store, specifically to address the |
youth segment, I think I mentioned it last time around and very soon we are going to 5-6 in the | |
city and 25 stores across the country. So, this is purely for youth segment prescription eyewear | |
like Titan EyePlus for the rest. | |
Manish Gupta: | Hi Rakesh, Manish here, I think Fastrack Girls bags, we are seeing a very good response, we |
launched Spring Summer Drop 1, Drop 2 and while growth have no logic here because 2.5-3 |
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Titan Company Limited published this content on 11 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 August 2022 11:45:53 UTC.