Titan Company - Q2FY21 Company Update - ICICI Securities

In its preview of Q2FY21, the management indicated that Titan's jewellery division saw a sharp recovery in Q2FY21 signifying the inherent strength of the business model. Jewellery sales have now reached 98% of pre-Covid levels (on a comparatively lower base), which were higher than the management's expectations of 80% recovery rate. Despite various headwinds, Titan continued on its store addition spree by opening 14 Tanishq stores in H1FY21 (eight stores added in Q2FY21). The liquidity stress faced by regional unorganised players can play out as an opportunity for Titan. Titan's healthy balance sheet will enable it to capture market share growth opportunities through healthy store additions. Watches division recovery is sluggish with sales reaching 55% of pre-Covid levels in Q2FY20 (September: 70%). Sustained investments over the last three years to enhance digital presence have started yielding positive results during tough times. Going forward, the overall demand trend for the festive season in Q3FY21E appears positive.

Valuation & Outlook

Given the encouraging demand recovery trends, we revise our revenue and earnings estimates upwards for FY21E by 10% and 15%, respectively. Titan remains a quality franchise with strong brand patronage. Over the years, the company has consistently exhibited its ability to gain market share amid a tough industry scenario. We continue to remain structurally positive on the company and its long term growth prospects. We roll our estimates to FY23E and build in revenue CAGR of 13% in FY20-23E, mainly driven by growth in jewellery segment (15% CAGR). RoCE is expected to revert back to 30%+ levels by FY23E. We upgrade the stock from HOLD to BUY with a revised target price of Rs. 1450 (50.0x FY23E EPS, previous TP: 1170).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Titan_CoUdate_Oct20.pdf

Shares of Titan Company Limited was last trading in BSE at Rs.1253.2 as compared to the previous close of Rs. 1199.95. The total number of shares traded during the day was 313847 in over 12972 trades.

The stock hit an intraday high of Rs. 1267.8 and intraday low of 1200.1. The net turnover during the day was Rs. 392534990.

Source : Equity Bulls

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