Note from Titan Company: Buy: Q3 growth far exceeds estimates


Jewelry sales up 37% year-on-year; the perceived price of the shares is misleading because it is a structural winner; “Buy” kept with a TP of 3,050

Growth was impressive in the 3rd quarter, far exceeding expectations: (i) Jewelery grew 37% year-on-year on a relatively high basis (+ 16% last year) driven mainly by festive demand. Network deployment accelerated with the addition of 14 new Tanishq (net) stores. (ii) Watches and clothing increased 28% year-on-year, led by Tier 2 and 3 cities and a sustained recovery in walk-in visits. (iii) Eyewear grew 27% year-on-year driven by healthy demand growth and network expansion. (iv) Taneira opened two new stores, bringing its total number of stores to 16.

(v) CaratLane sales grew 64% year-over-year and it added six new stores. And (vi) Titan’s standalone sales grew 36% year-on-year, far exceeding consensus. Should you still buy Titan? The stock has climbed 64% in the past year, significantly outperforming the Nifty 50 Index (+ 26%) and although stocks are now trading at a PE FY23e of 76x, we still view Titan as the one of the most attractive. composed stories and one of our best shopping ideas in India. This is explained by the continued exceptional performance of the Jewelery activity as well as by the prospect of creating new large-scale companies which should continue to fuel this construction.

Key elements of Titan’s long-term appeal: (i) The concept of long-term membership is well in place as Titan (around 7% market share) appears well positioned to take advantage of the large unorganized size of the jewelry sector (stimulated by consumer confidence, brand, value proposition in terms of price, exchange offers, design, focus on marriage) by regularly gaining market share. We write a 5 year jewelry CAGR of 20% +.

(ii) Titan is also developing options for long-term growth, including carefully choosing its international foray and new companies such as Taneira, which are likely to become major value drivers over the next five years. Titan’s eyewear business is now on the path to strong profitable and sustainable growth. (iii) We see the start of a phase of strong growth, driven by the deployment of the network (40+ points of sale per year), the strong support of wedding sales, the recovery of watches, glasses and the acceleration of Taneira’s growth.

(iv) Perceived dearness is deceptive and simply reflects the “long time to capture growth” that the market is willing to attribute to winning business models such as Titan. In our framework, the market values ​​long-term profits at 15-16%, which is well within the limits of what Titan could offer and will likely appear less and less demanding as new companies such as Taneira grow. . at 3,050 versus 2,900 as we revise our estimates and advance our valuation base. The third wave of COVID-19 is a key risk.

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