Titan's Q3 Performance Sparkles with Robust Growth Amid Gold Price Surge
Titan Co. Ltd has delivered a glittering performance in the third quarter of fiscal year 2026, capitalizing on the steep rise in gold prices to achieve remarkable revenue growth. The company's domestic jewelry segment, encompassing brands such as Tanishq, Mia, and Zoya, excluding bullion sales, recorded a staggering 40% year-on-year increase to ₹19,921 crore for the quarter ended December. This represents a multi-quarter high in growth, significantly boosting the segment's dominance within Titan's overall revenue structure.
Jewelry Segment Dominates Revenue Mix
Jewelry now constitutes approximately 90% of Titan's total revenue, underscoring its pivotal role in the company's financial health. The average gold price during Q3FY26 surged about 65% compared to the same period last year, providing a substantial tailwind. Plain gold revenue jumped 37% year-on-year, primarily driven by wedding-related purchases and increased sales of gold coins. Meanwhile, studded products saw a 26% rise, fueled by high-value segment purchases at Tanishq, store expansions for Mia, and growth in solitaire offerings.
Management insights reveal that the overall average ticket size in Q3 stood at ₹190,000. Interestingly, ticket-size growth diverged, with plain gold jewelry experiencing faster increases compared to studded jewelry. However, a concerning trend emerged at entry-level price points, where consumer sentiment was adversely affected, resulting in flat overall buyer growth. Titan has been grappling with pressure in jewelry pieces priced below ₹1 lakh, prompting strategic shifts to enhance accessibility.
Strategic Pivot to Lightweight Products
To address affordability challenges, Titan has pivoted towards lightweight products across its portfolio. This includes introducing 18 karat traditional gold jewelry in specific regions, particularly in parts of North and East India, where the management noted greater openness to such offerings during the Q3 earnings call. This move aims to cater to price-sensitive consumers while maintaining brand appeal.
Profitability and Margin Dynamics Under Scrutiny
In a higher-gold-price environment, maintaining profit margins proves challenging. Titan's management emphasizes that absolute Ebit (earnings before interest and tax) growth is becoming increasingly crucial over margin percentages. For Q3, domestic jewelry Ebit soared 59% year-on-year to ₹2,166 crore, with margins expanding by 129 basis points to 10.9%. After adjusting for a ₹253 crore impact from gold customs duty reduction in Q3FY25, normalized Ebit increased 34%, though margins contracted approximately 50 basis points.
Profitability faced headwinds from margin dilution in studded jewelry due to elevated gold prices, a skewed product mix favoring higher coin sales, and increased investments in marketing and campaigns. Analysts at ICICI Securities highlight that margin sustainability within the normative range of 11-11.5% remains a key monitorable, as high gold prices led to margin dilution in the studded segment, and higher coin salience could continue to pressure jewelry margins.
Market Reaction and Analyst Perspectives
Titan's stock has surged about 30% over the past year, reaching a 52-week high of ₹4,378.40 per share. However, valuations appear pricey, with shares trading at 63 times FY27 estimated earnings based on Bloomberg consensus. Jefferies India has raised its earnings per share estimates for FY26-28, citing higher gold price assumptions, while maintaining a 'Hold' rating with an increased price target of ₹4,700.
Management commentary indicating that January trends mirrored Q3FY26 offers some comfort to investors. Nonetheless, the critical question persists: will higher gold prices induce lasting changes in consumer behavior? In the near term, increased volatility in gold prices may deter consumers from making purchases, a trend that warrants close observation.
Future Outlook and Key Challenges
Titan must consistently achieve strong revenue growth to cushion margins against potential pressures. The company's ability to navigate gold price fluctuations, adapt to shifting consumer preferences, and sustain profitability in the studded segment will be pivotal. As the jewelry giant continues to leverage wedding demand and strategic product innovations, its performance in upcoming quarters will be closely watched by market participants.
