Emkay Global has recently come-out with its report on Titan, in which the brokerage says that Titan's Q3 business update highlights a robust growth momentum, indicating healthy market share gains. The brokerage has set a buy on the stock price for 15% gains.
Strong growth in Jewellery business
Excluding bullion sales of Rs3.4bn in the base quarter, the Jewelry segment grew 37% in Q3 and posted a healthy 2-year CAGR of 26%., Emkay Global has said in its report.
"The strong sales CAGR was driven by a 15% jump in ticket size vs. pre-pandemic levels, higher footfalls/conversions and a 9% CAGR in the store count. Management attributed the strong trends to buoyant jewelry demand during the festive season as well as new customer acquisitions, aided by its regionalization strategy. The studded mix improved slightly vs. the previous year. Enrollments in the Golden Harvest Scheme (GHS) recorded strong double-digit growth. Tanishq's network was expanded by 14 stores, including two new stores at prime locations in Dubai," the brokerage has added.
Caratlane growth surges to 64%
Caratlane maintained its strong growth trajectory with 64% growth in Q3 and a 2-year CAGR of 50%. "Growth has been driven by a 30% store count CAGR and launch of new merchandise (Dunes collection). The rise in the share of studded sales in Q3 should further strengthen the margin improvement trajectory for Caratlane. Other businesses (Taneira, Fragrances and Accessories) grew 44%, aided by high operational stores and new launches. TEAL recorded a 9% decline," Emkay Global has said.
Valuations and view
"Based on the update, we expect TTAN to report a solid 30% revenue growth to Rs 95 billion (37% excl Rs3.4bn bullion sale in Q3FY21). A slight improvement in the studded mix and operating leverage should lead to a 150bps improvement in its EBITDA margins to 13.2%. We estimate a PAT of Rs8.6bn vs. Rs 4.2 billion in Q3FY21. Factoring in the solid growth momentum, we increase our FY23/FY24 EPS estimates by 8-9% and raise our Dec'22 target price to Rs 3,000 (from Rs 2,770), valuing the stock at 65x Dec'23E EPS. Retain Buy," the brokerage has said.