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Motilal Oswal Report
Titan Company Ltd.’s Q1 FY23 result, though strong (three-year jewelry sales compound annual growth rate of 23% - the best among consumer companies), was below our estimates.
The management said gold prices have remained stable and that there has been no adverse impact on Jewelry demand so far. This was contrary to our fears that the hike in gold import duty on July 01, 2022 will increase domestic gold prices and therefore affect demand.
As a result, there has only been a minor correction in our FY23 operating profit forecast, despite the miss in Q1 FY23 versus our estimate.
While Titan Company expects margin in the Jewelry business to remain in the 12-13% range, it stated that the healthy margin improvement in watches and wearables (13% Ebit margin) and eye care (~15% Ebit margin) is likely to sustain.
This implies that these segments will no longer remain margin dilutive as feared.
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