Titan Rises Most In Three Months On Double-Digit Growth Across Segments In Q2

A Titan watch. (Photo: Meraj Mirza/Unsplash)

Shares of Titan Co. Ltd. gained the most in three months after the Tata Group company posted "healthy double-digit growth across most businesses" with overall sales growing 18% year-on-year.

The jewellery and watch retailer in its quarterly business update said its store network continued to expand in the quarter ended September, with a net addition of 105 stores.

Growth was broad-based across segments:

Jewellery: Titan said the division grew 18% year-on-year, despite a high base of Q2 FY22 that "had elements of pent-up demand and spillover purchases of a Covid disrupted Q1 FY22". Studded sales were higher "driven by good activations and better contribution from high value purchases. The product-mix improved compared to last year but continued to be below pre-pandemic levels".
Watches and wearables: The division grew 20% year-on-year and reported its highest quarterly revenue. "The strong tailwind demand led by a desire to own more premium I differentiated watches helped brand Titan grow fastest in the watches category (assisted by higher volume and average selling prices YoY)."
Eyewear: Sales from Titan Eye+ stores saw double-digit growth year-on-year. This, however, was offset by lower year-on-year sales across trade and distribution channel leading to an overall 7% growth for the division.
Subsidiaries: Titan Engineering and Automation Ltd. business grew 139% year-on-year, while CaratLane recorded 56% growth "driven by promotions around Raksha Bandhan and hero launches during the quarter".

Also, Titan said, the outlook for festive season continues to be "optimistic and is visible in positive consumer sentiment across categories".

Shares of the Tanishq brand owner rose nearly 6%, the most since July 7. Trading volume also spiked to 12.3 times the 30-day average at 9:30 a.m.

The scrip closed 5.3% higher at Rs 2,730.5 apiece on Friday.

Shares of Kalyan Jewellers Ltd. also rose 4.2% on its business update indicating strong demand, while peers Tribhovandas Bhimji Ltd. and PC Jeweller Ltd. also gained.

Of the 31 analysts tracking the company, 23 maintain 'buy', five suggest 'hold' and three recommend 'sell', according to Bloomberg data. The return potential implies a downside of 1.6%.

Over the last two days, Centrum Broking, Citi reiterated 'buy', while Macquarie retained 'outperform' on the stock. Morgan Stanley has a 'overweight' recommendation, while Axis Research maintained 'reduce'. Antique Stock Broking has a 'hold' recommendation on the stock.

Here's what brokerages said:

Morgan Stanley

Has an 'overweight' rating at a target price of Rs 2,902.
Initial Q2 trends were strong with 18% YoY growth in Jewellery division
Improving studded mix, positive consumer sentiment and a good festive season outlook are key positives.

JPMorgan

Maintains 'overweight' with a target price of Rs 2,800, implying a potential upside of 8%.
Jewellery revenue grew 18% on a high base led by higher growth for studded jewellery, which also bodes well for margins.
Expects the healthy revenue momentum to aid the share price performance in the near term.
Its medium-term growth outlook remains good, in our view, supported by various initiatives to drive higher sales of wedding/studded/fashion jewellery, a strengthening value proposition, and new customer acquisitions.
Titan also stands to benefit from higher market share as jewellery purchases shift to organized players and the unorganized segment becomes less competitive. Within the Indian discretionary consumption space, Titan is uniquely positioned in terms of hefty headroom for market share led revenue growth over the long term, strong competitive moats, lower threat to profitability and portfolio diversification opportunities.
Key downside risks are a slowdown in sales growth; increased competitive activity; adverse regulatory measures; high gold price volatility, which depresses gold jewellery demand; and significant margin deterioration.

Emkay

Maintains 'buy' with a target price of Rs 2,700, implying a potential upside of 4.1%.
Update suggests a robust 3-year consolidated revenue CAGR of 24%.
A strong Q2 and an optimistic festive commentary should drive an upgrade in consensus estimates, as the Street is currently factoring-in muted growth over Q2-Q4 FY23.

Kotak Institutional Equities

Maintains 'add' with a target price of Rs 2,800, implying a potential upside of 8%.
See upside risk to our growth forecast of 32%. Titan's attractiveness comes from low market share (6-7%) in a large addressable market and wide gap versus competition and focus on keeping its lead.
Given that the company is gearing up (positioning) for 20% year-on-year growth in the upcoming festive season, further upgrades to our estimates are imminent.