Buy Titan Company Ltd For Target Rs. 3,350 By Emkay Global Financial Services Ltd
TTAN saw growth moderation in Q1 with 17% growth in the jewelry business vs recent trends of ~25% growth. Also, LTL growth for TTAN in the early double digits is weaker vs 18-19% for peers. In our view, Street’s expectation of a high-teen jewelry growth for FY26 at stable margin is at risk, as the 17% growth in Q1 comes on a weak base (9% growth); the rest of FY26 has a strong base of ~25% growth, enabled by a 900bps duty-cut last year. Further, the revenue mix is seemingly weak currently, with higher growth in the low-margin coin sales and lower growth in the high-margin studded/plain gold segments. TTAN’s 1YF valuations at ~65x are demanding and leave limited room for disappointment. Given the risk to estimates, the increasing competition, mushrooming LGD players and deteriorating RoIC profile, we maintain REDUCE on TTAN with TP of Rs3,350 (50x Jun-27E EPS).
TTAN (REDUCE): Growth to moderate despite pick up in Gold price
Gold prices are up ~35% in Q1FY26, with a ~15% spike in Q1 itself. Despite a low base (heatwaves/elections) and significant gold price inflation, growth in Q1 has moderated vs prevailing trends of 15-20% SSG. Despite network expansion, buyer growth is flat across both Tanishq and Caratlane, likely impacted by the significant gold price inflation, expansion of existing players, and entry of new players (Indriya) in select pockets. With low footfalls at stores, the high-margin studded sales (low double-digits) are also under pressure which otherwise see better traction in periods of rise in gold price. While there have been periods of strong rebound in the past, expectations of a recovery now need to be weighed against a strong base, which had a big customs duty-cut related pick-up in Q2/Q3FY25. Companies are taking specific actions in terms of reducing the variance in gold price/making charges vs competition and focusing on gold exchange/monthly instalments to safeguard business. Notably, secondary growth can differ from the reported primary growth of 17%, based on the extent of stocking or de-stocking at franchisee partners.
Senco (BUY): Strong growth trends; initial signs of franchisee interest in noneast geographies, encouraging
Senco shared a strong update with 24% retail revenue growth, helped by a strong 19% SSG, with remaining growth on account of new store additions. Interestingly, the ticket growth has also improved, from 6% in Q4 to 10% in Q1, despite a sequential spike in gold price. Overall reported revenue growth is higher at 28% in Q1 vs our estimate of ~20%. Senco added 9 jewelry showrooms, which include 4 COCO and 5 franchisee stores. Encouragingly, two of the five franchisee stores were opened in Meerut (UP)/Nagpur (MH) which indicates initial signs of franchisee traction in non-East regions and have potential to aid faster/ asset-light expansion. Also, management commentary suggests a healthy revenue mix with ~35% volume growth in Studded sales. Senco currently trades at an attractive valuation of 25x/20x FY26E/FY27E EPS. We currently have a BUY on the stock with TP of Rs500 (25x Jun-27E EPS).
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