Margin sparkles for Titan in Q2
₹8,575 crore in Q2 excluding bullion sales, which formed around 85% of the company’s standalone revenues. Fortunately for investors, jewellery Ebit margin adjusting for bullion sales came in better-than-expectations at 14.1%. True, it is lower than the 15.3% margin seen in Q2 FY23, but remember the company had seen certain one-off gains last year that were not sustainable.
Ebit is short for earnings before interest and taxes. Improved share of studded jewellery in the mix to 33% in Q2FY24 from 32% in Q2FY23, helped the company fare better on the margin front this year. There was also a material beneficial impact of the shift in the “Shradh" period—when sales are typically slow—to October this year from September last year.
The other encouraging bit is that the adverse effect of the fall in diamond prices is expected to be limited for Titan, according to the management. Diamond prices have come down meaningfully in the higher caratage category, especially solitaires. In keeping with this, Titan has done small corrections in pricing.
Solitaires form a small portion of Titan’s studded portfolio so the overall impact on margin is not expected to be material. Still, to that extent, the company expects some minor margin dilution over the six to seven months. The company has maintained jewellery margin guidance at 12-13%.
On the demand front, the ongoing December quarter is crucial as it would have the positive influence of festival sales. Even so, the shift of the Shradh period to October combined with the elevated gold prices are factors that may play spoilsport on growth for the quarter. To be sure, investors are sitting on smart returns.
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