Titan Company (Titan) reported an expected subdued quarter with sales down 3% YoY for the jewellery segment. A strong Q4FY21 base (up 71% YoY), impact of Covid in Jan-22 and gold price volatility in Mar-22 were the key factors halting growth (9MFY22 growth of 46%). Watches/Eyewear clocked 12%/5% growth. Titan highlighted that underlying demand continued to be strong across businesses.
While the performance is below trend, it is attributable to one-off factors with the underlying structural growth unchanged. We believe any correction in the stock will be an opportunity to buy. We maintain our target EV/EBITDA at 65x (FY23E EBITDA) with an unchanged TP of Rs 3,065. Maintain ‘Buy’.
Jewellery: Subdued performance
Titan highlighted that Q4FY22 was a volatile quarter and the jewellery division ended on a flat note over a strong Q4FY21 base (had benefit of a large B2B order). Business saw subdued activity in top cities due to the Omicron wave in Jan-22, a very strong resurgence in Feb-22 and again a drop in customer purchases in Mar-22 on the back of a sharp rise in gold prices and sentiment impact due to the geo-political scenario.
Watches and eyewear were stable
The watch division saw good growth momentum, clocking 12% YoY growth (112% of Q4FY20) with sales increasing across all offline channels. Eyewear grew 5% YoY (124% of Q4FY20).
Outlook: Structural higher growth
Titan has been among the biggest beneficiaries of the shift from unorganised to organised segment in jewellery. Given its brand heft, the company has managed to outpace other large jewellers. We expect this trend of market share gains to sustain, driving its multi-decade growth. Furthermore, the company is currently only present in ~220 cities, and has a target to extend its presence to 500-plus over the next five years.
We maintain our target EV/EBITDA at 65x (FY23E EBITDA) with an unchanged TP of Rs 3,065. Maintain ‘BUY/SO’.