Prabhudas Lilladher's research report on Titan Company
TTAN’s annual analyst meet highlighted strategic growth drivers for next growth cycle over FY22-27. TTAN aims to further scale up core businesses and increase investment behind emerging segments like Taneira, Eye Care, Wearables and Women hand bags. TTAN is looking at achieving growth in core categories through 1) significant revamp of stores across Watches, jewellery and Eye care 2) Increasing penetration in tier2/3/4 cities 3) increased focus on regionalization, innovations & customization and 4) customer centric approach with Omni channel strategy across segments. We believe Watches & Wearables target of Rs 100bn over the next 5 years looks quite aggressive (34% CAGR) considering the division has grown by a 5% CAGR over FY17-22. Although TTAN is indicating 20% sales CAGR in Jewellery segment, margins will be range bound given rising intensity of competition and likely reduction in physical gold premium. We believe Eyecare business has reached a critical mass and benefits of cost restructuring will start getting reflected in coming years. We believe new businesses such as International jewellery, Taneira and women's bags offers long term growth potential with Rs25bn/Rs10bn/Rs10bn over FY27 which will make TTAN a more comprehensive play on Lifestyle retailing.
Outlook
TTAN will not enter into new businesses over the next 2 years and cash flows are likely to come under pressure given increased investment in planned ventures. We estimate 25.3% PAT CAGR over FY22-24 and remain positive given structural story. Maintain BUY with DCF based target price of Rs2,701 (unchanged) with moderate returns in near term.
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