Target: ₹2,750
CMP: ₹2,470.70
Growth opportunities in India (in consumption for sure) have been never under question. However, very few managements are able to translate opportunity to reality and Titan is definitely one.
Its good (Q3) performance highlighted important facets: buoyancy in jewellery demand and formalisation underway (expected to further accelerate); share gains in south with good margin profile; confidence that growth will be a key driver for margin expansion (management has always been vocal on this and we agree); and eye on long-term potential (exports, Carat lane, etc.).
The confidence on eyewear business is pleasing – 1,000 stores by March 23 (nearly 700 now).
Titan continues to benefit from increased share of jewellery in overall wedding expense, consumer spending more on discretionary given savings in travel etc. and accelerated industry formalisation (smaller competitors facing supply and financing challenges).
We increase our FY23 earnings estimates by nearly 6 per cent, modelling revenue/EBITDA/PAT CAGR of 26/50/64 per cent over FY21-24.
Retain Add with a DCF-based unchanged target price of ₹2,750.
Key downside risks are irrational competitive environment and potential shift to fixed making charges that could limit long-term benefits from operating leverage.