IGI Logo

Robust revenues driven by weddings in Q1FY23

Titan’s Q1FY23 business update point out that company has witnessed near normal quarter reporting revenue growth of 205% in India driven by (a) low base, (b) wedding season, (c) stable gold prices, and (d) network expansion. Interestingly jewelry sales grew 207% YoY, 3-year CAGR augmented to 23% in Q1 (up from 15% in Q4FY22). Management said, the studded share was back to pre–Covid levels and improved YoY. Titan added 120 stores across divisions/ formats in Q1, taking store tally to 2160 stores in India. Caratlane (72.3% sub) reported highest revenues growing at 207%. We believe deferred weddings due to Omicron wave inQ4 pushed pent up demand coupled with festival demand drove strong footfalls. We remain positive on growth prospects for Titan and retain Buy with DCF-based TP Rs2,817 (implying 69.5x FY24E EPS).

Jewelry segment witnessed 207% growth led by strong footfall and plain gold grew 3X

Jewelry revenues (ex. Bullion) grew 207% (our est. ~Rs78bn) YoY, 3-year CAGR 23% in Q1 (up from 15% in Q4FY22). Management alluded it to (a) Q1 being the first non-disrupted quarter in the past three years which also supported network expansion and campaigns, (b) strong demand led by the occasion of Akshaya Tritiya in May, (c) higher studded share, reaching back to pre-pandemic levels in Q1, and (d) successful regional campaigns like Uttama (WB) and Rajadhiraj in Odisha. Interestingly plain gold jewelry grew 3X YoY, yet weddings jewelry growth was slightly lower than overall growth but management opined its share in the revenue mix was largely stable. Ticket size was marginally higher YoY.

Robust growth across watches and wearables/eyewear despite external factors

Watches and wearables division saw highest-ever quarterly revenue, up 158% YoY (2% on 3- year CAGR). Management attributed revenue growth to, (a) sales from key channels of MultiBrand Retail (MBR), Titan World and Large Format Stores (LFS) continued their growth trajectory from FY22, (b) wedding season worked well for all brands and channels especially in April and May, (c) Wearables growth nearly quintupled on a low YoY base whilst maintaining the momentum seen in the latter half of FY22, and (d) store expansions (net) continued with 26 new stores of Titan World and 15 of Helios taking the store count to 882. Eyecare division grew by 176% YoY (8% on 3-year CAGR basis). Growth was led by led by both Titan Eye Plus (TEP) and Trade & Distribution channels.

Caratlane (72.3% sub.) reported impressive growth at 51% while

TEAL increased 77%: Caratlane (72.3% sub) grew 207% YoY (61% on 3-year CAGR). Caratlane strategy for Q1 centered on engaging and attracting customers for Akshay Tritiya. Caratlane achieved its highest ever sales on the day of AT (20% higher than Dhanteras of 2021).

Valuation driven by potential earnings upside

We expect continued strong revenue momentum for jewelry led by forthcoming festive season being strong due to deferred weddings from Q4, as customers have postponed the purchases due to rising gold prices in Q4. We expect with geo-political issues to be settled soon, reflecting commodity prices to fall, that could induce advance purchases for future. Nonetheless, mandatory hallmarking is taking speed and will have positive impact benefiting organised players like Titan. We remain positive and expect strong demand condition across divisions to drive revenues and margin expansion. We retain BUY, with a DCF-based TP Rs2,817 (implying 69.5x FY24E EPS). Risks – irrational completion, higher gold prices.

To Read Complete Report & Disclaimer Click Here

For More Centrum Broking Disclaimer https://www.centrumbroking.com/disclaimer/

SEBI Registration No.:- INZ000205331

Above views are of the author and not of the website kindly read disclaimer