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Focusing on premiumization, digital channels, and global expansion

Titan Company Limited, a prominent player in India’s consumer goods sector, is renowned for its wide range of products across watches, jewellery, and eyewear. Established in 1984 as a joint venture between Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO), Titan's portfolio includes popular brands like Tanishq (jewellery), Fastrack (youth accessories), and Titan Eye+ (eyewear). Its jewellery division, Tanishq, is the largest revenue contributor, benefiting from India's increasing demand for branded and trusted gold and diamond jewellery. The company is known for its strong brand equity, innovation in product design, and expansive retail network. Titan's focus on premiumization, digital channels, and global expansion has positioned it as a market leader in the lifestyle segment

Investment Rationale

Market leadership: Titan enjoys a dominant position in the organized jewellery and watches markets in India, with an estimated market share of ~8%. The company’s market leadership in these segments is supported by its distinct brand, association of trust with Tata group, continuous store additions, and its pan-India distribution networks. As of June 2024, Titan has presence in over 280 towns with over 900 exclusive brand outlets with brands like Tanishq, Mia, and Zoya in the jewellery segment. In watches segment, it has 1,137 exclusive brand outlets with more than 8,000 multi-brand outlets, with presence across 330 towns with brands including Titan World, Fastrack, and Helios.

Strategic gold hedging policy: Titan has implemented a well-structured hedging policy to safeguard itself against fluctuations in gold prices, which are a key input for its jewellery production. The company sources gold primarily through three channels: gold metal loans from banks, customer exchanges, and spot market purchases. For gold acquired via metal loans, Titan locks in the quantity but determines the liability upon actual sale, creating a natural hedge. For spot purchases, the company uses future contracts on commodity exchanges to align with expected sales, effectively mitigating price risks. This comprehensive hedging strategy ensures Titan remains protected from adverse gold price movements, contributing to financial stability and operational efficiency.

Strong brand value: Titan enjoys a strong brand reputation, bolstered by its association with the Tata Group, which is renowned for its commitment to ethical business practices and high-quality standards. The company leverages a broad portfolio of established brands across multiple lifestyle segments. In the jewellery category, its key brands include Tanishq, Mia, CaratLane, and Zoya. Meanwhile, in the watches and wearables space, Titan's portfolio features well-recognized names like Titan, Sonata, Fastrack, Raga, and Xylys. This diverse range of brands across jewellery and timepieces enhances Titan's market presence and appeal to a wide audience, further solidifying its position as a leader in the lifestyle and fashion sector.

Outlook & Valuation

Titan has a large presence in the Jewellery industry through its brands like Tanishq, Mia, Zoya and Caratlane and has an overall market share of ~8% further, downward revision of custom duty on gold imports is a positive in the long-term with short-term implications on profitability and gold on lease. Company is also an emerging lifestyle player with presence across segments like Watches, Eye-Care and Emerging business. The company is focus on increasing its footprint by store expansion while taking efforts to improve margins. Its new business continues to see consistent growth. On the financial front, we have estimated its revenue/EBITDA/PAT to grow at 21.5%/28.0%/28.9% CAGR over FY24-26E. Thus, maintaining our Buy rating and a target price of Rs 4,270.

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