Buy Titan Company Ltd For Target Rs. 3,752 - PL Capital
Demand outlook positive, global volatility a risk
Quick Pointers:
* Sub Rs50,000 and studded jewelry impacted due to rising gold prices.
* Management guided for 11-11.5% EBIT margin with opening 45-50 stores for FY26
TTAN reported a robust 4Q led by 1) value growth leg by 30-40% higher gold prices 2) 330bps margin gain in watches and 3) 20bps higher margins in jewellery enabled by operating leverage and hedging gains. 1H26 outlook remains positive given low vase due to elections and no marriage days. Higher gold prices are impacting demand however consumers are shifting to lighter jewellery and value growth remains strong. Gold on lease charges are stabilizing and the gap in only 70bps now, TTAN will gain from higher gold prices and margin requirements given strong balance sheet than competitors.
We raise FY26/27 EPS by 0.4/4.2% respectively and 22.7% PAT CAGR over FY25-27. We assign SOTP based target price of Rs3752 (Rs3695 earlier). Retan BUY.
Standalone Revenues (ex of Bullion) grew by 23.3% YoY to Rs135bn (PLe: Rs128.2bn); with Jewelry/ Watches/ Eyewear growing by 20%/ 20%/ 16%. Gross margins increased by 49bps YoY to 21.7%. EBITDA grew by 30% YoY to Rs14.4bn Margins grew by 82bps YoY to 10.7% (PLe:10.4%). Adj. PAT at Rs8.7bn was higher than our estimates of Rs8.5bn due to higher sales.
Jewellery revenues grew by 19.5% YoY to Rs121bn led by higher gold prices. EBIT grew by 22.2% YoY to Rs13.3bn; margins increased by 20bps YoY to 11.%. Bullion sales were nil 8.6bn 4Q. Studded ratio was at 30% down 3pc YoY. Tanishq added 4 stores, taking the total count to 501 stores. The relatively higher growth in gold jewellery and gold coins had an impact on the product mix impacting margins, however hedging gains offset any impact. 1Q trends remain favorable, although rising gold prices can provide volatility in demand in the near term.
Watches and Wearables revenues grew by 19.8% YoY to Rs11.2bn driven by 18% robust growth in analog watches; EBIT grew by 66% YoY to Rs1.3bn; margins expanded by 330bps YoY to 11.8%. Premium brands continued their strong performance with international brands growing at double digit growth. Fastrack topped the growth chart at 44% YoY, followed by 25%YoY in Sonata. Watches gave a healthy performance with a 330bps expansion in margin YoY.
Eyewear grew 15.7% YoY to Rs1.9bn; EBIT grew by 150% YoY to Rs200mn; margins expanded by 560bps YoY to 10.4%. Closed 11 stores (net) in 4Q25, reached total count to 891 stores. Frames and Lenses grew in low-double digits with sunglasses sales growth outpacing others by 52%YoY. International brands registered a strong growth of 47% YoY while house brands saw 7% growth in the same period.
Emerging business sales grew 5.2%; losses increased to Rs370mn: Fragrances grew by 26% YoY led by high double digits growth in SKINN and Fastrack. Women handbags clocked 10% YoY led by new store openings, TTAN opened 4 IRTH stores. Taneira sales were down by 4% YoY. During the quarter SKINN piloted its first experiential store in Seawoods, Mumbai.
Key Concall Highlights: 1) Overall buying sentiment remained muted amidst rising gold prices especially in sub Rs50,000 jewelry. 2) Consumer are opting for lower carat jewelry (9k-18k) to remain under budget they are scaling down in product complexity and lower making charges in higher price bands. 3) Growing traction in smaller solitaire sizes; large solitaire buyers are cautious and prefer gold over diamond as investment.4) Gross margins impacted due to product mix shift. However, the hedging gain due to forward contract offset the impact. 5) LGD’s are seeing an increase in production due to which prices are continuously falling 6) The company may need to make more capital investments in inventory if gold prices continue to rise. 7) wholesale prices of rough diamonds, especially in the higher carat edge segment, have increased, possibly due to Chinese demand. 8) TTAN guided for opening 45-50 store in FY26 with additional 50-60 stores to go under renovation. 9) TTAN has maintained its guidance for an 11% to 11.5% margin but does not expect any upside due to uncertainty around gold prices and other future uncertainties. 10) TTAN outlook for jewellery is bullish, with a commitment to driving healthy double digit (15-20%) for FY26 led by healthy new buyer growth. 11) The company’s financing cost is impacted by gold prices, as the same quantity of gold is now 30%-40% more expensive, and they have to pay interest on that increased amount
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