Titan Company Rating: ‘Buy’ | Another strong performance by firm

Titan Company (Titan) reported another exceptional quarter with strong growth (Jewellery/Eyewear/Watches up 37%/26%/29%) and product mix driving a multi-quarter high margin (Ebitda 11% above consensus). Store addition, traction in wedding jewellery and new buyer growth in focus markets are the key positives.

Factoring in the outperformance, we are increasing FY22/23e Ebitda by 10/7%. We maintain the target multiple of 65x FY23e Ebitda, which yields a revised TP of Rs 3,065; retain ‘Buy’. While such high double-digit revenue growth may moderate (and earning upgrades too), Titan continues to be a compelling structural story—still makes up hardly 15/6% of the organised/total jewellery market.

Jewellery: Festive and wedding season lend heft to performance – Titan highlighted buoyancy in jewellery demand was driven by festive purchases in October and November, which led to a 37% y-o-y uptick in revenue (ex-bullion sales). Other highlights: (i) Both walk-ins and customer conversions were significantly higher than last year (30% + y-o-y). (ii) New buyer growth was higher than total buyer growth driven partly by Tanishq’s regionalisation strategy of winning in focus markets. (iii) While ticket sizes were stable, they were ~15% higher than pre-pandemic levels. (iv) Both plain and studded categories witnessed ~35%-plus y-o-y growth.  (v) GHS enrolments have recorded high double-digit growth rates. (vi) Wedding sales were 40% higher y-o-y along with higher contribution to total sales. Overall, even in the Jewellery segment, Titan reported a multi-quarter high margin (for the festive quarter) driven by better product mix and higher realisation.

Eyewear and watches clock strong recovery: The watches segment clocked strong growth momentum (up 29% y-o-y, 113% of Q3FY20) across multi-brand channels, both online and offline, mainly on the back of the Titan brand. In Eyewear, it clocked 26% y-o-y growth (118% of Q3FY20) driven by sunglasses and frames with a demand uptick also seen in international brands.

Outlook: Structural higher growth – We are increasing FY22/23e Ebitda by 10%/7%. We maintain our target EV/Ebitda at 65x (FY23e Ebitda), which yields a TP of Rs 3,065 (Rs 2,867 earlier). Maintain ‘BUY/SO’. Key risks: (i) Gold price volatility. (ii) Muted market share gains.