Q4FY21 Result Update - Titan Company - ICICI Direct

With a complete washout in Q1FY21 (70% decline), Titan's jewellery division ended the year strongly with marginal sales growth of ~3% in FY21 (excluding gold bullion sale). This signifies the inherent strength of the business model & its strong brand patronage. Key takeaways from Q4FY21: a) revenue growth momentum accelerated in Q4 with jewellery division reporting 70% YoY growth (supported by favourable base, large B2B orders for gold coins), b) underlying growth in January-February was at 32% YoY (excluding B2B order), c) reported positive grammage growth of ~45% after six consecutive quarters of negative growth owing to softness in gold prices, d) studded category also saw healthy growth but plain gold segment, coins saw much better growth, leading to studded mix at 30% in Q4FY21 vs. 37% in Q4FY20, e) healthy growth trajectory sustained till mid-April 2021, until lockdown disruptions, f) currently 50% of stores are operational, g) watches division saw a strong recovery, with revenue recovery rate reaching 90% in January-February, 100% for Q4FY21. Owing to unfavourable product mix, gross margins continued to witness contraction by ~830 bps YoY to 22.1%. However, on account of positive operating leverage and tight leash on operating overheads, EBITDA margins contracted 210 bps YoY to 10.9%.

Valuation & Outlook

Though the near term may present a volatile demand scenario, we believe Titan is a structural growth story and appears to be a key beneficiary of the unorganised to organised shift in Indian jewellery market. Focus on market share gains and maintaining b/s strength (RoCE: 30%+) positions Titan as our preferred pick in the discretionary category. Owing to recent lockdown disruptions, we revise our earnings estimates downwards for FY22E and marginally tweak our estimates for FY23E estimates. We bake in revenue, earnings CAGR of 20%, 66%, respectively in FY21-23E. We reiterate BUY with a revised target price of Rs. 1800 (60x FY23E EPS, previous TP: Rs. 1830).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Titan_Q4FY21.pdf

Shares of Titan Company Limited was last trading in BSE at Rs.1491.95 as compared to the previous close of Rs. 1506.3. The total number of shares traded during the day was 145085 in over 8312 trades.

The stock hit an intraday high of Rs. 1516.45 and intraday low of 1471.6. The net turnover during the day was Rs. 216749658.

Source : Equity Bulls

Keywords