Screener shows ROCE as 26.80% while ratestar shows ROCE as 35.67%. Which is the correct ROCE ?
This may be good news but there are some ifs and buts
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Through a cursory search on google , Came across a below average rating (2.4/5) voted by more than 500 votes on mouthshut for Tanishq .While the below may be a small sample size (also quite possible that the positive reviewers generally dont write reviews as compared to negative experience reviewers ) , and as much as i would like to ignore the ratings , any number of votes above 500 should be an signal that need not be ignored atleast . One review even speaks about polish removal within a short time after it being done twice etc
A scuttlebutt i did by visiting Taneira store seems that stores are neatly decorated and good rack displays with vast range from cost effective sarees and dress materials to the most expensive ones . So it seems to cater to all categories of population unlike Tanishq which is more for the luxury and affluent. Since the store is newly opened , did not see much of a crowd , however it seems a scalable oppurtunity although the current proportion is very low in the revenue
Disc - Invested
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Some excerpts from insightful article shared by @sujay85
As India is bringing in structural changes, the Rs 3 lakh crore gold jewellery business is witnessing a transition where the shift from unorganised to organized sector is becoming increasingly noticeable.
According to the World Gold Council, organised or branded players had a meagre 5% share of the jewellery market in 2005. It had risen to 30% in 2016. In 2019, the organized players have cornered 32% of the market and it is expected that by 2020 their share will rise to 45% which will pave the way for a further diminishing number of unorganised players. India annually consumes 850 -900 tonnes of gold.
India has over 45% under the age of 25. "Our large-scale consumer research indicates that they do have a strong affinity with gold. The research says that if they were given Rs 50,000, a third of respondents aged between 18–33 said they would invest in gold,” said PR Somasundaram, managing director, India, of World Gold Council.
Some even allege that unorganised jewellers sell low quality gold and a large number of them prefer to sell jewellery without issuing proper bills. Also, small jewellers are not able to provide digital payment options. Buyers with awareness prefer to buy gold with white money and proper bills.
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Anyone tracking Goldiam International ?
It seems these guys filling the nirav modi space by providing quality Jewelry.
Falling demand may further rattle the weaker players helping organized players take advantage and especially this may actually help Titan come out stronger .
Disc - I am not a sebi registered analyst
Higher gold price is negative for jewellers. As with rise in price demand for jewellery goes down and sales is less. They get temporary profit due to higher valuation of closing stock but that remains on paper only till it’s actually sold.
Just had talked with jeweller friend yesterday their sales have suffered very much .
Inventory gain is a one time gain and if the payment to the supplier is being made on actual sales, the price running at that time would be paid by the jeweller and hence he wouldn’t gain
i dont know about titan but usually all jewellers prefers to give gold in exchange for jewellery to supplier especially when price goes up. when price of gold goes up their is less demand for fresh purchase and their is more supply of old gold . they cant just go on purchasing old gold at higher price when they cant sell new at high rates.
Titan does not play the gold price movement and tries to hedge to be immune to gold price movements. This is my understanding.
Disc: Investing since last couple of years
If it’s true and it’s likely because of its size, Titan will not gain from price movement
If they are able to get perfect hedge for their inventory, net net they can gain 0.5%. Please correct me if i am wrong.
I think inventory valuations as per GAAP is cost or market value whichever is lower. So even if the price of the gold goes up the inventory is reported at its historical value. It is reported at market value only at the time there is a perfect hedge. Moreover, i had seen many people saying that a rise in price of the gold is bad for the business. I agree there can be a temporary slump in demand but it’s their business and we can raise doubt on their capability of doing business. From the management commentaries i understood that they have risk management system to mitigate against the price rise, etc.
question is not about valuation of stock. its part of their business. but when price goes up demand and sale of gold ornament is going down . management is professional but demand is price elastic. and new generation are inclined towards junk jewells . so in future their will be shift in demand .
p.s i am not invested in titan . just interested in gold bond
I’m trying to understand what Junk Jewellery is, and if it is getting popular what stops Titan from getting into that category by offering a new brand or brand extension. Please see if the following two brands represent junk jewellery:
Mia by Tanishq
Glitterati by Tanishq
https://www.tanishq.co.in/glitterati/collection
in short yes , they are type of junk jewells. junk are those who dosnt have resale value. they have very less gold or silver inside, and most of the time they do not have gold or silver inside. so they are of lesser value at finished product.
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I had mentioned earlier that though there will be slump in demand but if the price rise is hedged then net net there is a gain.
@HIMSHAH Thanks, understood!
Since, Titan has their foot in the right place, they may be able to gradually grow their junk jewellery offerings, and proportionately reduce their fine jewelries.
The only downgrade is that the per unit cost of junk is lesser than fine jewelries, but I reckon people will undertake junk jewellery purchases more often than fine jewellery purchase. So, top-line contribution may remain the same. And, I believe that with superior branding and more value addition Titan can actually improve the margin from junks.
Looking good is an inherent humane desire. So I don’t assume that jewellery purchase will subside with time, only the preference for the type of jewellery may change.
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