Titan shone brighter than Kalyan Jewellers, say Q4 updates
1 min read . Updated: 10 Apr 2023, 12:44 PM IST
PremiumInvestors should watch out for the impact of the sharp increase in gold prices in 2023 on demand for jewellery
Gold prices have risen considerably so far in 2023, but demand remained resilient in the March quarter (Q4FY23) for jewellery retailers Titan Co. Ltd and Kalyan Jewellers India Ltd, with the former doing relatively better. Of course, the quarter also benefitted from a low base, considering that Q4FY22 was partly impacted by the Omicron wave.
In the last quarter, Titan’s jewellery business saw 23% year-on-year (y-o-y) revenue growth, ahead of the 16% rise in Kalyan Jewellers’ India business. In terms of two-year revenue compound annual growth rate (CAGR), Titan clocked a 9% increased compared to a 4% rise for Kalyan Jewellers, said analysts at ICICI Securities in a report on 9 April. Kalyan Jewellers‘ slower store expansion was one of the factors weighing on revenue performance, they added. “During FY19-21, Kalyan added only three stores in India while Titan added 66 Tanishq stores," said the ICICI report. Tanishq is one of Titan’s jewellery brands.
Also, Kalyan Jewellers’ store portfolio is relatively young versus Titan, which had an impact on the former’s revenue CAGR performance. About 37% stores of Kalyan Jewellers are two-year-old compared to 20% for Titan, said ICICI Securities analysts.
However, it augurs well that Kalyan Jewellers is gradually expanding its presence. In FY23, the company added 23 stores. On the other hand, Titan’s count increased by 97 in FY23 to 541 stores.
Both the companies saw an increase in the share of studded jewellery, which would have a positive bearing on the margins in Q4. However, Kalyan’s gross margin in India is expected to be at similar levels y-o-y.
Investors seem to have noted the slow progress in case of Kalyan. Shares of the company are 23% lower than their 52-week highs. In comparison, Titan’s shares are about 8% lower than their 52-week highs, which also means valuations are not exactly cheap.
To be sure, investors should watch out for the impact of the sharp increase in gold prices in 2023 on demand for jewellery. Titan noted soft demand in March after reporting strong traction during January and February. Given this, it remains to be seen if the momentum at the entry level, which saw normalization in demand in Q4, sustains.