Titan Company - Retail Footprint Expansion Encourages Growth: Motilal Oswal

Motilal Oswal Report

Titan Company Ltd. has a strong runway for growth in the consumption space in India, with robust earnings growth visibility and compounding for the long term.

While the recent run-up in gold prices has led to near-term postponement of demand, Titan has historically performed well when gold prices surged.

During 2008-13, when gold prices went up by a 24.8% compound annual growth rate, Titan’s jewelry Ebit and overall profit after tax clocked a CAGR of 49.7% and 35.6%, respectively.

During the same period, its share price saw a 32% CAGR. Since its making charges are also based on the percentage of value of gold, margins will improve after a lag.

Titan’s medium- to long-term earnings growth opportunity is best-of-breed, reflected in five-year sales/Ebitda/profit after tax CAGRs of 20.3%/24.3%/23.9%.

Given its sub-10% market share in jewelry and the struggles of unorganised and other organised peers, we see a promising growth outlook for Titan.

We maintain our 'Buy' rating on the stock with a target price of Rs 3,570.

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