Accumulate Titan Company; target of Rs 1352: Prabhudas Lilladher

Prabhudas Lilladher's research report on Titan Company

We are increasing FY21/22/23 EPS estimates by 50%, 17% and 19.9% and rating from Hold to Accumulate. Our optimism on TTAN has been elevated by 1) faster than expected rebound in Jewellery sales (98% in 2Q) led by wedding segment and 2) improved competitive position of TTAN in post Covid scenario. TTAN has near term headwinds like 1) Cutback in discretionary spends 2) 40% higher gold prices and 3) heavy discounting by local jewellery chains, however we expect TTAN to gain market share led by 1) accelerated industry consolidation (not even marginal players but even organized players shut stores) 2) assured volumes under GHS (20-25% of sales 3) strong balance sheet 4) ability to open stores even in tiring times (14 added in 1H21) 5) franchisee based model and 6) implementation of Hall marking in 2021. Although recovering from COVID, discretionary categories like Watches, Eyewear, Fragrances and Sarees will take longer to recover. We expect full recovery to set in from festival season and now estimate YOY sales and profit growth in 2HFY21.

Outlook

We estimate 47% decline in FY21 EPS to Rs9.3 but an increase to Rs23.9 and Rs 29.4 in FY22 and FY23. We believe TTAN will continue to enjoy premium valuations and value the stock at 46xFY23 EPS and arrive at a target price of Rs1352 (Rs1057 earlier@45xDec22 EPS). Upgrade to Accumulate.

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