Buy Titan Company Ltd for the Target Rs 6,000 by Motilal Oswal Financial Services Ltd
Inspiring performance; robust India profitability
* Titan Company (TTAN) delivered another strong quarter, with consolidated revenue growing 29% YoY. Standalone revenue grew 24% YoY, while standalone jewelry sales (ex-bullion) rose 38% YoY. Demand was temporarily impacted in May by the PM announcement to postpone jewelry purchases, the customs duty hike, and wedding deferments, but recovered well in June, with healthy momentum continuing into July.
* Domestic jewelry posted 33% LFL growth, and studded jewelry revenue grew 34% YoY. Studded share stood at 27% in 1Q. Buyer growth stood at 5%, with average ticket size increasing 31% YoY, supporting strong value growth.
* TTAN reported an INR4,070m inventory gain following the increase in customs duty from 6% to 15%. Adjusting for the INR3,860m gain in Tanishq, Mia, and Zoya, standalone jewelry EBIT grew 41% YoY to INR18.6b, with EBIT margin expanding 20bp YoY to 11.7% (est.10.7%). It also included a 75- 80bp MTM gain due to the divergence between international and domestic gold prices, which is expected to reverse over the next 2–3 quarters. CaratLane’s EBIT margin expanded 340bp YoY to 10.1% after adjusting for the INR210m inventory gain, reflecting improving profitability and operating leverage. The DAMAS business reported a loss due to the ongoing geopolitical situation.
* The watch division reported revenue growth of 21% YoY (above) and EBIT growth of 3% YoY (19.1% margin). Eye care revenue rose 21% YoY and EBIT increased 20% (8.3% margin).
* We remain constructive on growth in the jewelry industry, particularly among top players, and believe TTAN will remain well-positioned competitively, supported by initiatives such as its exchange program. Apart from industry formalization, stability in gold prices can further improve margin visibility for TTAN. We model a CAGR of 18% in sales, 22% in EBITDA, and 25% in APAT over FY26-28E. We reiterate our BUY rating on the stock with a TP of INR6,000, based on 60x Sept’28E EPS. TTAN continues to remain one of our top picks in the space.
Highlights from the management commentary
* Jewelry demand remained resilient during the quarter despite a temporary disruption in May, driven by the PM’s announcement on May 10 to postpone jewelry purchases, customs duty changes on May 13, and the wedding period calendar. These factors together impacted consumer sentiment for around three weeks.
* TTAN has also rolled out ‘Cash for Gold’ across all stores from June, allowing customers to convert their gold into cash; while traction has been limited so far, management views the initiative primarily as a customer solution, with potential to serve as an avenue for new customer acquisition.
* Margin expansion in 2HFY27 is expected to be supported by a higher studded mix, lower contribution from gold coins, increased adoption of lower-carat jewelry, sourcing initiatives, and various gross-margin improvement programs.
* The DAMAS business was impacted materially by the ongoing geopolitical situation, with footfalls and ticket sizes declining sharply, resulting in losses during 1QFY27 despite the core business being profitable at the time of acquisition.
Valuation and view
* We raise our EPS estimates by 3-4% for FY27 and FY28.
* TTAN, with its superior competitive positioning (in sourcing, studded ratio, youth-centric focus, and reinvestment strategy), continues to outperform other branded players. Its brand recall and business moat are not easily replicable; therefore, Tanishq’s competitive edge will remain strong in the category.
* The store count reached 3,551 as of Jun’26, and the expansion story remains intact. The non-jewelry business is also scaling up well and will contribute to growth in the medium term.
* Apart from industry formalization, stability in gold prices can further improve margin visibility for TTAN. Overall, we remain constructive on growth in the jewelry industry, particularly among top players, with TTAN as the bellwether and, given its superior historical execution track record, best positioned to benefit. We model a CAGR of 18% in sales, 22% in EBITDA, and 25% in APAT over FY26-28E. We reiterate our BUY rating on the stock with a TP of INR6,000, based on 60x Sept’28E EPS.
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