Buy Titan Company Ltd For the Target Rs. 4,443 by Religare Broking Ltd
Robust Profit Surge Driven by Premium Jewellery and Strong Festive Demand
* Stellar Profit Surge and Revenue Growth: Titan reported a significant surge in its consolidated Net Profit (PAT), which jumped by 60% YoY to Rs. 1,119 crore. This impressive bottom-line growth was supported by a 28.8% increase in Net Sales to around Rs. 18,725 crore, with the strong performance attributed to an early festive boost, particularly during Navratri.
* Jewellery Division as the Main Growth Engine: Titan’s jewellery business delivered strong growth in Q2FY26 with total income up 21% YoY to Rs. 14,092 cr (excluding bullion). Domestic business grew 18% to Rs. 12,460 cr, CaratLane rose 32% to Rs. 1,072 cr, and international jewellery nearly doubled to Rs. 561 cr. EBIT margins stood at 11.1% for domestic, 10.1% for CaratLane, and 2.8% for international. Festive demand, gold exchange offers, and store expansion (34 new stores) drove performance.
* Robust Margin Expansion: The company showcased operational excellence, with its EBITDA growing by over 51.7% and the EBITDA margin expanding to 10%. This margin improvement suggests effective cost management and a favorable product mix, successfully converting top-line growth into enhanced profitability.
* Consistent Retail Network Expansion: Titan maintained its aggressive retail expansion strategy, adding a net total of 55 new stores during the quarter across all its consumer businesses. This expansion, which included 35 new stores in the Jewellery segment (Tanishq, Mia, CaratLane) and 15 in Watches & Wearables, took its total retail network to over 3,377 stores, further solidifying its panIndia and international reach.
* Double-Digit Growth in Watches & Wearables: The Watches & Wearables division delivered a steady 13.3% increase in total income, reaching around Rs. 1,477 crore. This was primarily fueled by robust demand and premiumisation in the analog watch segment, which grew 17%. However, the smart wearables category saw a moderate decline, reflecting broader industry trends, while the segment maintained a healthy EBIT margin of about 16.1%.
* Accelerating International and Emerging Business Momentum: The International Business segment saw exceptional growth, with revenue nearly doubling at 84% YoY, driven by Tanishq’s strong performance in the USA and GCC markets. Simultaneously, the Emerging Businesses (Taneira, Fragrances, Women’s Bags) reported a combined 34% growth (with Women’s Bags surging 90%), showcasing the successful diversification efforts and the potential for new growth avenues.
* Outlook – Cautiously Optimistic Amid Risks: Titan remains confident of sustaining double-digit growth in FY26 and beyond, particularly for its jewellery business (up to 20% growth is being targeted) though management flags risks from rising gold prices, working capital build-up, and strong base effects. Its ability to hold jewellery EBIT margin guidance (around 11-11.5 %) hinges on stabilising gold price inflation and controlling inventory and cost pressures. Meanwhile, non-jewellery segments are expected to contribute incremental growth and margin improvement. On the financial front, we have estimated its Revenue/EBITDA to grow at 22%/38.9% CAGR over FY25-27E and maintain a Buy rating with a revised target price of Rs. 4,443.
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