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Motilal Oswal Report
Titan Company Ltd.'s Q3 FY23 result was in line on sales front but lower than-estimated Ebitda margin (lower-than-usual domestic jewelry sales leading to reduced operating leverage) meant that Ebitda missed our estimate by ~11%.
Base quarter Ebitda margin was the highest since Q2 FY06 and hence, there was an unusually unfavorable base, which will not be the case going forward though.
The three-year consolidated sales/Ebitda/profit after tax compound annual growth rate remained robust at over 20% each in Q3 FY23.
Jewelry sales CAGR was robust too at ~23% in Q3 FY23. The management indicated that there has been no impact of gold price increase in January 2023 with the three-year CAGR trend in Jan-23 being even better than the corresponding number for Q3 FY23.
The ongoing urban discretionary slowdown does not seem to have hit the company's customer base. Titan has the best-in-class track record, better near term growth visibility than peers and the longer-term growth opportunity is also the best of breed, thus deserving high multiples.
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