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Strong revenue growth: Titan’s Q4FY23 topline performance was better than our estimates wherein its revenue came in at Rs 10,360 Cr up by 32.9% YoY driven by healthy consumer demand during the wedding season. Amongst segments, its Jewelry segment which accounts for ~88% of the total revenue grew by 41.3% YoY to Rs 9,120 Cr. Its watches & wearables grew by 41.3% YoY to Rs 883 Cr owing to strong demand for analog watches segment, while its Eye-care grew by 23.1% to Rs 165 Cr led by expansion of stores into various regions.

Subdued margin performance: Gross profit during the quarter was Rs 2,513 Cr, up by 27.6% YoY however the gross profit margin contract by 100bps to 24.3% owing to higher input costs. Its EBITDA stood at Rs 1,089 Cr registering a growth of 37.2% YoY while EBITDA margin came in at 10.5% with an expansion of 33bps. We believe there is a scope for margin improvement from Q2FY24 wherein the festive season demand and softening of raw material costs would result in better operating leverage.

Jewellery Segment Perfomance: Its revenue from its core Jewellery business (Tanishq) grew by 23.5% YoY to Rs 7,576 Cr while EBIT was reported at Rs 997 Cr with a EBIT margin of 13.2%. Studded Jewellery ratio stood at 33% in the overall mix vs 32% in Q4FY22 while average ticket saw too improved significantly by 8% YoY during the quarter.

Non-core businesses gaining traction: Its Watches & Wearables reached a milestone of ~1,000+ stores across India while hitting a record revenue mark in FY23 to ~Rs 5,000 Cr value led by strong performance from across brands. Its Eye Care Business achieved annual retail sale value of ~Rs 1,000 Cr, led by volumes growth as well as increase in average selling price across category.

Outlook & Valuations: Titan has a strong foothold in the jewelry and wrist watches category with a wide range of product portfolio. It caters to a diversified range of customers which enables stability in growth for the company. Going ahead, the company aims to increase its market share by penetrating rural areas and continue to add more stores in the international market which will aid the topline growth for the company. Financially, we estimate its Revenue/EBITDA/PAT to grow at a CAGR of 13.7%/23.2%/23.6% over FY23-25E. Hence, we have maintained a Buy rating with a revised target price of Rs 3,147 valuing the company at a PE multiple of 56x on FY25E EPS.

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