Titan Company (₹3,270.2), India’s leading jeweller and lifestyle company, announced its second quarter-FY24 results last Friday after market close. The consolidated revenue jumped over 30 per cent year-on-year (yoy) to ₹12,653 crore. The net profit rose nearly 10 per cent to ₹916 crore for the quarter, bettering consensus estimates by 6 per cent.

Despite the results beating the expectations, the stock barely moved since the announcement of the numbers. This should be largely due to the recent run up in price which discounted positive festive time performance. Expensive valuation also could be another reason for the muted reaction. The trailing PE (price-earning) ratio stands at 89.

Since the beginning of this financial year, the jewellery stocks have been rallying. The stock of Titan has gone up 30 per cent from April this year. This was due to the fall in gold price since April which is positive for jewellery demand. Between April and September, gold futures on the MCX depreciated nearly four per cent.

Even though the prices have gone up since October, driven by the safe haven demand on the back of the Israel-Hamas war, the management is optimistic about the business in the coming quarters. Particularly, in the third quarter, the festive season demand can drive sales growth in jewellery.

Below is a recap of Q2 performance.

Segmental performance

The company has differentiated its operations under four segments. Among them, jewellery is the largest with nearly 80 per cent contribution to the total revenue. This is followed by watches and wearables with 10 per cent.

The remaining is contributed by eye care and emerging business. Fashion accessories and dress wear comes under the latter.

All four segments posted growth for the quarter. Notably, the quarterly revenue from watches and wearables crossed ₹1,000 crore for the first time as it posted a revenue of ₹1,092 crore, up 32 per cent yoy. Analogue watch sales remained the key growth driver for this segment as the premiumisation theme worked well for the company.

In the jewellery business, Tanishq, the jewellery brand of the company, expanded its international presence by opening two new stores in Qatar. Tanishq’s international presence now stands at 10 stores.

CaratLane, the subsidiary of Titan, posted strong revenue growth. The revenue from CaratLane expanded 45 per cent to ₹650 crore for Q2FY24.

The company is also optimistic about the third quarter as the festive season has started well, according to the management.

Financial performance

While the total consolidated revenue stood at ₹12,653 crore for the quarter, EBIT (earnings before interest and tax) was recorded at 1,392 crore, up 16 per cent. Although EBIT increased, the EBIT margin of 12.8 per cent Q2FY24 is a tad lower when compared to 13.7 per cent for the same quarter previous year. Management expects the EBIT margin to stay between 12 and 13 per cent in the jewellery segment

The key risk to watch out for in the medium term is the increasing gold price. A spike in the prices of yellow metal can dent the demand for jewellery.