Titan’s Q3 sales growth slowed down to 21% on 3yr Cagr (from 25% in Q2), due to demand slowdown post festive season in October. Similarly, secondary sales growth fell to 20% from 23% on 3yr Cagr. Ebit margin in Jewellery (ex-bullion) of 13% was down ~70bps YoY, owing to higher marketing investments and pricing pressures. Titan in Q3FY23 reported sales growth (exbullion) of 11% YoY with 3yr Cagr falling to 21% from 25% in Q2FY23, owing to weak demand post festive season in October. Jewellery business Ebit margin (ex-bullion) of 13% was slightly below our estimate of 13.3%. Ex-100bps one-off in base quarter due to diamond price appreciation, margin was down ~70bps YoY/30bps QoQ, due to higher marketing expenses and pricing pressures.
From weak demand in November and December as consumers deferred their purchase due to high gold prices and lower wedding dates, Jan saw pickup in demand with healthy growth rates even on pre-Covid base. Moreover, recovery was also seen in low-price point segment, which has been under pressure for some quarters now.
Analysts of IIFL Securities cut their FY23 EPS by 1% on slight miss in margins in the quarter. They think that Titan can continue to deliver high-teens sales growth as volume per store in FY23 is still ~10% below long-term average. They are forecasting revenue Cagr of 17% for FY23- 25, on the back of store expansion, gold price inflation and normalisation of volume per store.
Analysts of IIFL Securities maintain Buy with target price of Rs 2800.
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