IGI Logo

Marginal decrease in revenue in 4QFY22

TTAN released its pre-quarterly update for 4QFY22. Here are the key highlights:

Omicron and volatile commodity costs weaken consumer sentiments

* TTAN witnessed modest demand across its consumer businesses in 4QFY22.

* Revenue declined 3% YoY due to the high base of the previous quarter.

Jewelry: A sharp rise in gold prices impacts demand adversely

* Jewelry segment’s revenue posted a decline of 4% YoY (excl. bullion sales) while the two-year/three-year revenue CAGR stood strong at 28%/16%.

* The decline was mainly due to the high base of 4QFY21 as it had a benefit of a large B2B order contributing 10% to the quarter’s growth (adjusted for this order, revenue growth for 4QFY22 would be flat YoY). The other factors that contributed to the decline were: a) subdued business activity in top cities due to Omicron in Jan’22 and b) a drop in customer purchases in Mar’22 because of volatility in gold prices and sentimental impact due to the geopolitical conflict.

* During the quarter, jewelry segment added 16 new stores (seven in Tanishq, eight in Mia by Tanishq and one in Zaya) taking the total tally to 444.

* Walk-ins saw minor decline, the customer conversions and ticket sizes grew marginally for the quarter.

* Sales from top 8 cities grew in single digits while the rest of India saw a small decline.

* The plain jewelry category bore the brunt of gold volatility in Mar'22 leading to a slight decline for the quarter. Studded sales clocked a high single digit growth, thereby partially cushioning the impact of the plain jewelry category.

* The Golden Harvest Scheme (GHS) enrolments witnessed double-digit growth rates driven by strong buyer uptick.

Watches and Wearables: Recovery on track

* The division saw good growth momentum amid a challenging external environment with sales increasing across all offline channels backed by the Titan brand. The segment reported a 12% YoY growth.

* Retail and Large Format Stores (LFS) clocked higher growth followed by Trade.

* Geographically, West and North India recorded higher growth.

* The Watches & Wearables segment added 34 stores (24 in Titan World and 10 in Helios) in 4QFY22 taking the total store count to 843.

*44 Titan World stores were renovated to a new format to offer a wider choice of premium brands, thereby enhancing the overall customer experience.

Eyewear: Modest growth in 4QFY22

* The division posted 5% YoY sales growth in 4QFY22. The division's strong growth was driven by Sunglasses and Frames.

* It added 51 stores in 4QFY22, taking the total store count to 733.

Other businesses

* Other businesses grew 23% YoY in 4QFY22.

* Taneria: It opened two stores (Jamshedpur and Lucknow) taking the total store count to 20.

* Fragrances: It reported a growth of 21% YoY due to the increase in sales from departmental stores and e-commerce.

* CaratLane: Its digital first strategy enabled it to post a 51% YoY growth across product categories and locations. The digital approach allowed for early-trend detections leading to focused reactions in high potential micro-opportunities. Sales in Feb'22 nearly matched the highest monthly sales of Nov'21 (of Dhanteras) driven by the highly successful Valentine’s Day campaign.

Other points

* TEAL: The Automation Solutions business saw large dispatches in the quarter triggered by the postponement of deliveries on supply chain disruptions earlier. The enquiries have shown gradual improvement but are still below normalized levels. The Aerospace Business achieved moderate growth with good recovery in orders.

Valuation and view

* A combination of Omicron wave in Jan’22, a steep gold price increase and the adverse impact of uncertain geopolitical situation in Mar’22 led to a 4% YoY decline in jewelry sales (flat adjusted for B2B order last year) in 4QFY22 as shared in the end-of-quarter update. While a) gold prices have stabilized at lower levels by the end of the quarter, b) wedding demand remains very healthy and c) there is less likelihood of a disruption by any further COVID-wave, there could be some residual impact in 1QFY23E as well.

* The structural investment case for TTAN remains intact. We maintain our BUY rating with a TP of INR2,910 premised on 75x Mar’24 EPS.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer