Buy Titan Company Ltd for the Target Rs.4,250 by Motilal Oswal Financial Services Ltd
Resilient performance; industry tailwinds persist
In FY25, Titan Company (TTAN) continued to post strong double-digit growth (18% YoY) despite high gold inflation and intensified competition. The company continued to invest in supply chains, digital data, omnichannel capabilities, retail networks, and international markets. However, it witnessed margin pressure across its verticals. Jewelry business margin (standalone, ex-bullion) contracted 90bp to 11.4% (down 230bp from FY23). Volatile and elevated gold rates amid growing competition affected TTAN’s jewelry margin as well as demand sentiments. The company invested more in consumer promotions to drive growth and acquire customers. Jewelry revenue/EBIT (standalone, ex-bullion) grew 21%/12% YoY. The Watches & Wearables division clocked 17%/39% revenue/EBIT growth backed by robust double-digit growth across brands. The EyeCare division witnessed 10%/flat YoY revenue/EBIT growth, with EBIT margin contracting 100bp to 10% due to high overhead expenses and operating deleverage. Other businesses saw healthy revenue growth. TTAN clocked an impressive CAGR of 20%/18% in sales/PAT over FY19-25. Here are the key takeaways from the company’s FY25 annual report:
* Jewelry: The jewelry division experienced consolidated revenue growth of 19% and SSSG of 14% YoY for FY25. Studded sale growth was relatively muted at 12%, largely due to a decline in high-value solitaires and high gold inflation. There was margin pressure in FY25 because of higher gold prices, competitive intensity, and mix changes. Hence, the consolidated EBIT margin contracted 50bp to 10.1%. Standalone (ex-bullion) EBIT margin was at 11.4%. TTAN had guided standalone EBIT margin guidance of 11-11.5% for the jewelry business in the medium term. It added 154 stores across all jewelry brands, taking the total count to 1,091 stores in FY25. The division posted a consolidated CAGR of 22%/19% in revenue/EBIT over FY19-25.
* Watches and Wearables: The segment posted sales growth of 17% YoY to INR46b, led by robust double-digit growth across brands, categories, and channels. Analog watches grew 20% YoY, which led to a significant market share improvement in the multi-brand channels. The premium wave continued unabated, with excellent consumer interest in premium brands and sub-brands. The division expanded to 1,235 stores, adding 115 new stores. EBIT margin stood at 11.9% in FY25 (vs. 10% in FY24), aided by premiumization.
* Eye Care: The division reported 10% growth YoY to INR8b and an EBIT margin of 10% in FY25. 1HFY24 saw a healthy performance with double-digit growth, as the company focused on expanding affordable offerings, growing international brand presence, and doubling e-commerce sales. In FY25, TTAN closed seven Titan Eyeplus stores and one Fastrack store, taking the total count to 891 stores in India. Currently, it operates six international Titan Eye+ stores.
* Other businesses: Emerging businesses, Fragrances and Fashion Accessories, and Indian Dress Wear (Taneira) reported revenue growth of 7% YoY to reach INR4b in FY25. The organized perfumes category is growing at an estimated rate of 18-20%, with the value segment (
Valuation and view
* TTAN, with its superior competitive positioning (in sourcing, studded ratio, youth-centric focus, and reinvestment strategy), has continued to outperform other branded players. The brand recall and business moat are not easily replicable; therefore, Tanishq’s competitive edge will remain strong in the category. TTAN’s total store count reached 3,312 as of Mar’25, and the expansion story remains intact. The non-jewelry business is also scaling up well and will contribute to its growth in the medium term.
* TTAN’s EBITDA margin has continued to remain under pressure during FY25 (similar to FY24) owing to soft studded mix. It will be critical to monitor the margin outlook amid intensifying competition. The non-jewelry business is also scaling up well and will contribute to growth in the medium term. The business currently accounts for 12% and 10% of revenue and EBIT, respectively.
* We model a 16%/18%/22% revenue/EBITDA/PAT CAGR during FY25-27E. TTAN’s valuation is rich, but it offers a long runway for growth with a superior execution track record. Reiterate BUY with a TP of INR4,250 (based on 65x FY27E EPS).
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