Q3FY21 Result Update - Titan Company - ICICI Direct

Titan is among few discretionary companies in our coverage to have reverted back to heathy sales growth. Key takeaways from Q3FY21 results: a) jewellery division posted healthy sales growth of 16% YoY with fall in grammage arrested to 14% vs. 31% decline in Q2FY21, b) demand for gold coins continues to be on higher end YoY but share QoQ falling (Q3FY21: 8%, Q3FY20: 5%, Q2FY21: 14%), c) share of studded ratio on uptrend with absolute growth of 9% YoY in Q3FY21, with wedding jewellery also seeing strong growth of 10% YoY d) watches division showed sharp improvement QoQ but still below pre-Covid levels (~88%), e) increased its ad expenditure by 72% QoQ to Rs. 105 crore but still below its run-rate of Rs. 150-160 crore, f) despite gross margins declining 300 bps YoY, EBITDA margins contracted mere 50 bps YoY to 11% due to stringent cost control measures. Overall 12% sales growth in Q3FY21 is ahead of management's internal target of achieving normalcy by Q4FY21E. Revenue trajectory accelerated further in January with jewellery division seeing 28% YoY growth driven by 16% growth in studded ratio. Robust performance in challenging times reaffirms our thesis of long term market share gains for Titan.

Valuation & Outlook

Factoring in the Q3FY21 performance and improvement in demand outlook, we revise our earnings estimates upwards by 3-7% for FY22-23E. The company's 'War on Waste' programme is well on track with tight control on inventory position and higher focus on gold on lease replenishment (~56% of inventory). We expect initiatives to improve cash positions and significantly enhance RoIC (from 31% in FY20 to ~42% in FY23E). We build in revenue and earnings CAGR of 14% and 22%, respectively in FY20-23E. Healthy balance sheet, sustained focus on market share gains and better earnings visibility prompts us to upgrade from HOLD to BUY with a revised target price of Rs. 1830 (60x FY23E EPS, previous TP: Rs. 1660).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Titan_Q3FY21.pdf

Shares of Titan Company Limited was last trading in BSE at Rs.1494.35 as compared to the previous close of Rs. 1524.15. The total number of shares traded during the day was 158876 in over 5958 trades.

The stock hit an intraday high of Rs. 1535 and intraday low of 1491. The net turnover during the day was Rs. 239800138.

Source : Equity Bulls

Keywords