Q2FY23 Preview: Titan Company: Revenue seen at Rs82,353 million, PAT at Rs7,582 million

Result date: 4^th November, 2022
Recommendation: Add
Target price: Rs3,000

During the September 2022 quarter, Titan Company (Titan) posted market-leading growth and witnessed acceleration in 3-year sales CAGR. The company’s jewellery division grew 18% (ex-bullion) translating into 3-year CAGR of 27% versus 23% in Q1, and was above Kalyan’s 3-year CAGR of 18%. While plain gold jewellery clocked low double-digit sales growth, studded sales growth was higher than overall jewellery division, driven by good activations and better contribution from high-value purchases.

Sales of watches & wearables grew 20% year-on-year, translating into a 3-year CAGR of 5% versus 3% in Q1FY23 driven by year-on-year increase in volumes and average selling price. Overall revenue could grow by ~15% over the year-ago quarter.

Studded share improved relative to the year-ago quarter, but continued to trend below pre-COVID level. Walk-ins grew in low double digit year-on-year with steady new buyer conversions. Eyecare segment’s sales grew by 7% over the year-ago quarter, translating into a 3-year CAGR of 4% versus 7% in Q1FY23. While Titan Eye+ stores saw double-digit growth over the year-ago quarter, this was offset by lower sales growth across trade and distribution channel.

EBIT margin of the jewellery division ex-bullion is expected to be flat over the year-ago quarter at 13.0%. In watches, analysts at IIFL Capital Services forecast margin of 15.5%, up 210 basis points year-on-year. In eyewear, EBIT margin is expected to contract by ~800 basis points year-on-year to 15%.

Titan’s Profit After Tax or PAT could grow ~18% over the year-ago quarter.

Important management insights to watch out for:

• Update on demand during festive season
• Margin levers and outlook

Source: IIFL Research