The yellow metal is likely to rise this new year on the back of continued uncertainty in the equity markets, pushing investors towards safe haven investments.
Titan vs Kalyan Jewellers: Which stock will shine brighter in the long term?
With gold outlook bullish as well as consumer demand recovering, jewellery stocks Titan and Kalyan Jewellers will be in focus.
Stock price trend
Both these stocks performed very differently in the last 1 year. While Titan lost around 6 percent, Kalyan Jewellers witnessed a 70 percent jump in its stock price in this period.
However, on a long-term basis, Titan gave multibagger returns, surging nearly 220 percent in the last 5 years, whereas Kalyan Jewellers advanced around 83 percent in this period.
Titan has been giving negative returns for the past 3 months, falling 7 percent Just in January so far after a 2 percent and 4 percent fall in December and November, respectively.
Kalyan Jewellers, on the other hand, has fallen nearly 3 percent in January after a 19 percent jump in December. Before falling in January, the stock had given positive returns for the past 6 months (July-December), surging 111 percent in this time.
While Titan has risen nearly 35 percent from its July low of ₹1,827.15, Kalyan has advanced 115 percent from its May low of ₹55.2.
About the firms
Titan Company Limited is an India-based company, which is primarily involved in the manufacturing and sale of watches, jewellery, eyewear and other accessories and products. Its jewellery segment includes brands such as Tanishq, Mia, Zoya and CaratLane while eyewear segment includes Titan EyePlus. The watches and wearables segment includes brands such as Titan, Titan Clock, Fastrack, Sonata, etc.
Kalyan Jewellers India Pvt Ltd is an India-based jewelry retailer. The company is engaged in offering gold, diamond, platinum and silver jewelry products. The company’s brands include Mudhra, Anokhi, Rang, Vedha, Tejasvi, Apoorva, Ziah, Laya and Glo. The services provided by My Kalyan include jewelry purchase advance schemes, gold insurance, wedding purchase planning, advance booking of purchases to protect against price increases, etc.
Kalyan Jewellers said India's standalone operations recorded revenue growth of approximately 14 percent in the September quarter, despite a strong base. Titan Company, on the other hand, said its jewellery division saw an 18 percent YoY growth in the September quarter.
In Q2, Titan reported a 33.7 percent rise in net profit to ₹857 crore against a net profit of ₹641 crore in the year-ago period. Its revenue from operations grew 22 percent to ₹8,730 crore in the quarter under review from ₹7,170 crore a year ago. The jewellery business, excluding bullion sales, saw a growth of 18 percent in revenue to ₹7,203 crore compared to ₹6,106 crore in the corresponding quarter last fiscal.
"Despite an uncertain macro environment, the current festive season starting from the end of September month and continuing till the end of October has been quite positive and the consumer confidence remains upbeat," CK Venkataraman, managing director of the company said.
"We remain relentlessly focused on executing our growth plans in India and overseas and are optimistic about our performance in the remaining quarters of the current financial year," he added.
Meanwhile, Kalyan Jewellers reported a 54.02 percent growth in consolidated profit after tax (PAT) at ₹105.92 crore during the quarter ended September 30. The jewellery retailer's PAT stood at ₹68.77 crore during the corresponding period of the previous financial year. It recorded consolidated revenue of ₹3,473 crore for Q2FY23 as against ₹2,889 crore in the corresponding quarter of the previous year, a growth of 20 percent.
"We are satisfied with the performance during the recently concluded quarter and are extremely excited with the way the current quarter has started despite last year's high base.
"We have witnessed a revenue growth of approximately 25 percent for the festive period of 31 days approaching Diwali, when compared to the same period last year and are looking forward to a strong end to the quarter," Kalyan Jewellers India Executive Director Ramesh Kalyanaraman stated.
Which is a better stock?
Sunil Damania, Chief Investment Officer, MarketsMojo, has picked Titan over Kalyan.
"Corporate governance concerns appear to be of the utmost importance in gold jewelry businesses. We witnessed one such company from North India become a darling, with many predicting it would be the next big thing; however, investing in the stock eroded a good deal of investor wealth. Thus, it makes sense to stick with the dominant industry player. We believe that a better stock to invest in for the long term must be the market leader that is backed by a reputable business house," he said.
NS Ramaswamy, Head CRM Equity Online & Commodities, Ventura Securities, also likes Titan better.
"Although optically Kalyan Jewelers appears cheaper than Titan, the latter has a far more resilient business model. Market penetration of the organized sector is in single digits, so Titan can sustain high growth rates along with Kalyan Jewelers," noted Ramaswamy.
Jay Gandhi, Institutional Research, HDFC Securities, also prefers Titan between these two stocks. According to Gandhi, Titan is the better quality business of the two.
"Kalyan we don't cover. But prima facie, Kalyan has a long way to go in its journey to establish itself as a pan India brand (65-70 percent of the business is still South-based). On the other hand, Titan is already more relevant as a brand across India and has a wider assortment straddling multiple price points and multiple consumer preferences," he stated.
Sector and Gold outlook
According to Gandhi of HDFC Securities, demand in the jewellery segment is likely to moderate given the high base of the past 5-6 quarters. One can already see this in Titan's plain gold volume growth of Titan in Q2 and Q3 (single digits). Growth from hereon is likely to be underpinned by volumes which in turn will be a function of network expansion but the major part of the gold price tailwind seems behind, noted Gandhi.
He also pointed out that it is difficult to have a forecast on gold prices as it purely depends on geopolitical outcomes across the globe.
Meanwhile, Damani said that he is extremely bullish on gold and believes that it will perform exceptionally well in 2023.
"One reason gold should perform well is that we believe US interest rates will begin to fall by the second half of 2023. Gold is also a commodity with a boom-and-bust cycle. Since the previous boom cycle ended in 2012, we believe the time is ripe to reinvest in gold," suggested the expert.
The current situation of USD weakening, slow pace of interest rate hikes and inflation cooling off would drive gold price in 2023, said Ramaswaly of Ventura Securities. He expects gold in domestic prices to be above ₹57,000 per 10 grams (averaging ₹57,500-58,500 for the year 2023).
"Although the long-term prospect for GOLD is bullish, a sell-off could occur before the next bull market begins. Thus, buying emanates at various support levels of ₹54,800 and ₹55,500," he advised.
With an increase in consumer spending in India, jewelry demand is likely to continue higher. Central banks buying of gold into their reserves are further indicators of the bullish stance, he added.