Despite marketplace expectations that the business would be one of the most disrupted in the crisis, Titan has managed to surprise in each quarter with its pace of recovery, specifically for its Jewellery business enterprise (practically 80% of income and 90% of income), which is a important worth driver. The stock value has also mirrored this outperformance, practically doubling from the low in March 2020. While the stock has corrected from its current peak, we retain Buy rating on Titan.
Jewellery development should really continue to surprise: Given the stock’s current run-up, the important query now is no matter if Titan can nonetheless outperform the close to-term expectations. For October, Titan registered sales development of c8% y-o-y although the complete quarter ended with development of 16%, implying that development in November and December was c20% y-o-y. According to Titan, Jewellery sales rose by 28% y-o-y in January, and we anticipate the momentum to remain powerful as the studded promotion has performed nicely and demand for gold jewellery is set to stay robust.
The feedback of retailers corroborates these trends. Titan has also extended its studded promotion to accelerate development in March. The base for Q1FY22 onwards is also incredibly benign, demand has been powerful and its network rollout was aggressive final year in spite of disruption (Titan added 100K sq ft of jewellery region till Q3FY21). These are all components for incredibly powerful development in Q4FY21e and in FY22e, which could be a important catalyst for stock functionality, in our view.
For us, Titan’s appeal remains its extended-term possibilities to win marketplace share: (i) Titan’s appeal is its pole position to capture worth from the extended-term development prospective in the jewellery sector (driven by its customer trust, brand, compelling worth proposition of pricing, exchange gives, style, wedding concentrate) by gaining marketplace share regularly (ii) it is also developing extended-term development possibilities, such as Taneira (ethnic put on), which has the prospective to be a big worth driver that does not look to be in the present value and (iii) Titan is also progressively and firmly shaping its international development method to augment its development longer term.
Valuation inside affordable bounds: The present share value builds in extended-term earnings development expectations of c15%, on our estimates, which is an effortlessly surmountable hurdle offered the development possibilities and Titan’s formidable position to capture the worth of this potential development. We retain our TP of Rs 1,800 as we retain our estimates unchanged.