HCDEN Insights

Will Titan bounce back after Flat YoY Numbers?

7 April2022 • Parikshit Singh

Titan Company Ltd is one of India’s most well-known lifestyle brands. Recently Edelweiss Securities came out with a coverage report on the company.

Titan stated that Q4FY22 was a turbulent quarter, with the jewellery segment finishing flat compared to a strong Q4FY21 foundation (had a benefit of a large B2B order). Owing to the Omicron wave in January-22, business activity in major cities was muted, followed by a strong comeback in February-22, and then a dip in consumer purchases in March-22 due to a high spike in gold prices and sentiment impact due to the external geopolitical picture.

Other noteworthy points from the business updates were:

1. Sales in the top eight cities increased by single digits, while sales in the rest of India decreased slightly.
2. In Mar-22, the plain jewellery category was hit hard by gold volatility, resulting in a modest drop for the quarter. The damage was largely mitigated by studded sales, which grew in the high single digits.
3. Caratlane’s growth rate of 50% or more was impressive, despite the fact that it was still a tiny segment.
4. Tanishq has added seven new stores, Mia by Tanishq has added eight, and Zoya has added one.

Titan has benefited greatly from the transformation in the jewellery industry from unorganised to organised. Given the strength of its brand, as well as the confidence that the Tata name conjures, the firm has been able to outperform other prominent jewellers. This trend of market share gains is expected to continue, propelling the company’s multi-decade expansion. Furthermore, the organisation presently operates in just 220 cities, with a goal of expanding to 500 or more in the next five years.

Valuation & Outlook

While the results are below trend, they are due to one-time issues, with the underlying structural growth remaining intact. Any stock correction, Edelweiss feels will be a chance to purchase. The brokerage house keep their EV/EBITDA at 65x (FY23E EBITDA) with a target price at INR 3,065. Edelweiss maintains ‘BUY’ on the stock.

Source: Edelweiss Securities

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