Titan Company - Event Update - Growth levers intact, expect back ended returns

Mr. Amnish Aggarwal, Director- Research at Prabhudas Lilladher

We are cutting FY22/23/24 EPS estimates by 2.1/2.7/6.0% following slower than expected demand trends across Jewellery, watches and eyewear. 4Q sales were impacted by 1) 3rd wave impact in January 2) higher gold price impact on volumes in Feb and 3) impact of geopolitical uncertainty in March. Lower sales growth in watches and eyewear was a bigger surprise. However, excluding the one of impact from large order in base quarter and exceptionally strong 4Q21 sales, 28% CAGR over 2 years for jewellery sales remains positive.

Our channel check suggests that industry sales were down by 50-60% QoQ and Tanishq has gained share given structural tailwinds. Diamond prices are firm and jumped by 40% in past few months, we expect Diamond prices to remain firm given that Russian supply will not be available. We expect jewellery business to sustain strong margins due to inventory gains in diamond in 4Q and 1Q23 as well.

TTAN is well placed to capitalise on LT growth led by 1) benefit of hallmarking 2) Omni-channel strategy across jewellery, watches and eyewear and 3) new growth drivers like Caratlane, Titan Eye+, Taneira, and 4) entry into high growth segments like headphones and Truly Wireless earphones. We estimate 21% PAT CAGR over FY22-24 and arrive at a DCF based target price of Rs2754 (Rs2832 earlier). Although structural story remains intact, expect back ended returns given rich valuations of 65.4xFY24 EPS. Retain Buy.

Shares of Titan Company Limited was last trading in BSE at Rs. 2458.95 as compared to the previous close of Rs. 2541.25. The total number of shares traded during the day was 146259 in over 18004 trades.

The stock hit an intraday high of Rs. 2546.50 and intraday low of 2452.50. The net turnover during the day was Rs. 362694320.00.

Source : Equity Bulls

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TitanCompany INE280A01028 EventUpdate PrabhudasLilladher