Titan saw a resilient functionality amid disruptions, beating consensus: (i) impressive jewellery sales of cRs 25 bn (excluding Rs 4.2 bn bullion sales) in a disrupted Q1FY22 with retailer operational days in April/May/June of 73%/10%/ 58% of total. Recovery considering that June has been robust, led by new consumers, more rapidly rebound in metros, and pent-up demand for wedding sales (ii) Titan delivered a jewellery Ebit margin of +8.4% (vs -4.6% last year), defying the Street’s scepticism on margins, aided by a greater mix (studded sales 22% of total vs 18% in Q1), reduced gold coin sales (7% vs 14% in Q1), and aggressive expense cutting (iii) watch sales (up 3x y/y) and Eyewear (up 123% y/y) benefited from greater traction in omnichannel sales. Ebit loss for each narrowed substantially y/y (v) standalone sales grew 74% y/y and Ebitda/clean PAT came in at `1,440/`610 m, ahead of consensus.
Demand outlook remains powerful: (i) Consumer sentiment is rapid recovering. July demand rebounded effectively and Titan foresees robust demand in the coming quarters, specially in H2FY22 (ii) it added 26 jewellery shops in FY21 and it aims to open about 35 in FY22 to expand its network in middle India (iii) with each other with the benign base in FY21, the accumulated network rollout augurs effectively for powerful income development in FY22e. We pencil in jewellery income development of c25% in FY22e.
Market share obtain for Titan should really accelerate: (i) Titan is effectively placed to capture worth from the jewellery sector’s lengthy-term development possible by gaining marketplace share regularly (ii) mandatory hallmarking (phased implementation from 16 June, 2021) is now a different structural push for the business towards organised trade, exactly where Titan arguably has a ‘right to win’ with one hundred% of its jewellery hallmarked (iii) It is also constructing lengthy-term development choices, which includes picking out its international foray and new small business such as Taneira (ethnic put on), which has begun effectively and could be a massive worth driver.
Retain Buy: The present share cost builds in lengthy-term earnings development expectations of c15%, which can simply be accomplished, as Titan is in a powerful position to capture worth from segment development. We adjust our estimates and improve our TP to Rs 1,980 (from Rs 1,900) retain Buy.