Naveen Kulkarni, Reliance Sec-1200

This quarter, the jewellery business is set to clock growth in high teens but could remain below the management guidance. What is your expectation on the jewellery business?

Titan typically comes out with a release about the quarterly performance. The revenue numbers are already more or less known and so there might be a 0.5% up or down compared to what we are expecting. We are expecting an 18% growth in the jewellery business. I do not think the numbers might deviate much from that. The important factor and the most critical focus from the quarterly results will be on the margins for the jewellery business.

That is the key number to be looking out for in these quarterly numbers because in the base quarter, the margins were considerably high. Whether they are able to deliver on those margins and whether margins can stabilise or they can expand further is going to be the key number to watch out for in this quarter.

Apart from that, the other segments are also doing reasonably well. The only factor will be on the growth in terms of profitability and operating profit numbers.

Can I safely say that in the current and next two quarters, Titan will also feel the heat? You cannot have a situation where autos are slowing down, consumer discretionary is slowing down, people are not buying soap and shampoo but they will continue to buy jewellery.

Yes, that can very much happen because the whole slowdown in the consumption pack is not very clear. So, till mid February, things were not so bad or were reasonably okay. Post February, things started looking quite sluggish. How it has panned out and whether elections are a cause for that, there is no great historical precedence to support this or a structural slowdown that we are witnessing in the consumption space.

We will get clarity on that in another quarter or so. But as of now, if the slowdown is more structural, then Titan will also start feeling the heat in a quarter or so.

Can some of the consumer names get into both time and price correction because PE multiples are elevated?

See what generally happens with consumption stocks or stocks which do not need much capital to run their businesses is until and unless there is a serious compression in margins, let us say Hindustan Unilever is at 23% kind of an EBITDA margin and if the margins were to start compressing quite a bit from the current levels, then we are going to see a serious compression in PE.

Otherwise, it is more likely to be a time correction where the stock might be sideways in let us say plus to minus 5-6% kind of a zone. But because of rising competitive intensity and a slowdown where they are not able to take price hikes and then the cost structure moving up, we will start seeing compression in margins and that is when the PE compression will actually happen.

If that is not going to happen, margins will continue to be stable for the consumption and consumer companies. We are more likely to see the PE remain in band. There may not be a significant PE correction.


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