Emkay Global Financial Recommends Buying Titan Company with a Target of Rs 4400

Emkay Global Financial is optimistic about Titan Company and has given a “buy” recommendation, with a target price of Rs 4,400 per share, according to their research report from October 6, 2024.

Titan Exceeds Expectations in Q2

In its Q2 business update, Titan surpassed growth expectations across most of its business divisions. The jewelry segment, in particular, saw impressive growth of 26%, compared to Emkay’s 15% projection, and much better than the 9% growth seen in Q1. Same-store sales (LTL growth) rose to the mid-teens, up from 3% in Q1, likely helped by a large 9% reduction in customs duty. While the overall revenue mix is slightly weaker, with slower growth in the high-margin studded jewelry segment, Titan is still on track to meet its FY25 target of a 12% EBIT margin in jewelry. This strong Q2 performance should ease investor worries about slower growth and lead to a 4-5% increase in earnings estimates. Emkay Global recommends a “buy” with a revised target price of Rs 4,400 per share (based on 65 times expected earnings for September 2026).

ADVERTISEMENT

Strong Growth in the Jewelry Segment

Titan’s domestic jewelry business outperformed with 25% growth, exceeding Emkay’s forecast of 15% for Q2. Based on historical trends, Emkay estimates consumer (retail) sales grew around 20-21%, supported by mid-teen same-store sales growth and higher primary sales to franchisees, likely driven by festive demand. This is a big jump from Q1, where same-store and retail sales grew only 3% and 9%, respectively, and was likely triggered by the large 9% duty cut. The revenue mix is slightly weaker, with low-double-digit growth in studded jewelry and higher growth (~30%) in plain gold. However, the decline in solitaires, a lower-margin product within the studded segment, is not a concern, and Titan remains well-positioned to hit its 12% EBIT margin goal for jewelry in FY25.

Growth Across Other Segments

Titan’s other business segments also performed better than expected. The watches division grew by 20%, beating the projected 15%, driven by 25% growth in analog watches, though the wearables category saw a decline due to industry challenges. The eyewear segment grew by 6%, matching expectations, while the Caratlane and emerging businesses posted growth rates of 28% and 14%, respectively, compared to 18% and 4% in Q1.

Store Expansions On Track

Titan’s store expansion is proceeding as planned, with 75 new stores added across various segments. This includes 11 new stores for Tanishq and Mia, and one for Zoya. Titan World, Helios, and Fastrack added a combined 34 new stores, while Taneira and Eyewear saw moderate expansion. Caratlane also added 11 stores in Q1, bringing its total to 286 stores.

In conclusion, Emkay Global sees Titan as a solid investment, backed by strong growth in its key jewelry segment, solid performance in other business divisions, and continued store expansion.