Titan Company’s (₹3,280.15) shares tumbled on Monday, losing 7.2 per cent. The company announced their results on May 3 post market hours, which weighed on the price in today’s session. The year-to-date loss for the stock now stands at 10.8 per cent.

While the revenue for Q4FY24 has gone up, partially aided by increase in the price of gold, the margins were hit, leading to participants selling the stock today.

The consolidated revenue for Q4FY24 grew 22 per cent year-on-year (y-o-y) to ₹11,472 crore but EBIT (Earnings Before Interest & Tax) margins shrank.

EBIT for the final quarter of financial year increased 10 per cent to ₹1,192 crore; EBIT margin stood at 10.4 per cent compared with 11.5 per cent for the same period of previous year. The net profit the period improved 4.8 per cent to ₹771 crore but the margin dropped - it was 6.7 per cent as against 7.8 per cent in Q4FY23. Net income missed consensus estimates by 12 per cent.

The company recorded less margins because of the soft demand due to volatile and elevated gold prices in the recent months. Prioritising sales growth over the margins, the company provided higher offers and spent on promotions to fight the growing competitive intensity in the industry.

According to the management, it could take some months before the company can work around and expand the margins, which was dented due to an increase in the price of gold.

Segmental performance

The company operates in four segments viz. jewellery, watches and wearables, eye care and emerging business. Jewellery is the largest which contributed 87 per cent to the total revenue. This is followed by watches and wearables with about 8 per cent contribution. The topline of all the segments improved for Q4FY24.

Total income for Q4FY24 from the jewellery segment stood at ₹8,998 crore, growing 19 per cent over Q4FY23. In this period, the Average Selling Price (ASP) saw a single-digit increase according to the company.

Tanishq, the jewellery brand of Titan company, expanded its international presence by adding a store in Dubai and Chicago, USA in the last quarter. Thus, the brand’s international presence now stands at 16 stores. During the same quarter, Tanishq opened 11 stores in India.

In the watches and wearables division, the total sales were up 8 per cent to ₹940 crore for Q4FY24. But in the wearables segment, while the volumes doubled in the final quarter of FY24 compared to the same period last year, the revenue grew only by 3 per cent. This was due to the pricing pressure because of high inventory. The management expects this to be sorted out in the coming quarters.

CaratLane, a key subsidiary of Titan, posted a revenue growth of 29 per cent to ₹748 crore for Q4FY24.

Going ahead, elevated gold prices mean the margins might be under pressure for a few quarters or until the gold prices stabilise. Despite a fall in price, the price-earnings ratio now stands at about 83, which appears quite expensive. That said, Titan has always been trading at a premium as it is the dominant player in the industry.. However, this premium valuation will get tested if earnings growth does not pick up. Next few quarters will be crucial.