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ICICI Securities
Titan Company (Buy)
CMP: ₹1,258.7
Target: ₹1,470
After a significant decline in grammage growth in Q2FY20 (down 14 per cent), a reasonably strong festive season and healthy demand for wedding jewellery led to arrest of grammage de-growth in Q3FY20 (down 5 per cent). As guided by the management in its pre-quarterly update, the jewellery division reported stable revenue growth of 12 per cent y-o-y to ₹5,605.8 crore on high base of Q3FY19 (institutional order of gold coins worth ₹200 crore). Underlying retail sales were strong with value growth of 15 per cent y-o-y (gold prices up about 20 per cent y-o-y).
Valuation and outlook: We expect Titan to be a key beneficiary as India’s gold market continues to strive towards regulation and standardisation (recent mandatory gold hallmarking). The company has consistently exhibited its ability to gain market share amid a tough industry scenario. Robust balance sheet (30 per cent+ RoCE and virtually debt free status) and asset light distribution model have enabled it to outpace peers in terms of store addition.
We reiterate our BUY rating on the stock with a revised target price of ₹1,470 (51.0x FY22E EPS, earlier target price: ₹1,350).
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