Titan in high growth phase, say analysts; upgrade earnings expectations

A strong recovery in demand in the July-September quarter (Q2FY22), supported by sales near pre-Covid levels, propelled shares of Titan Company to new record high on Thursday. The stock of the Tata Group firm surged 11 per cent to Rs 2,383 apiece on the BSE in the intra-day trade, taking its market capitalization (m-cap) beyond Rs 2-trillion mark.

The m-cap of the jewellery maker was at Rs 2.11 trillion at the end of the session and stood at 23rd position in the overall m-cap ranking, BSE data showed. The shares closed 10.6 per cent higher at Rs 2,376 per cent relative to the Sensex's 0.8 per cent gain.

Going-forward, analysts expect an uptick in Titan’s earnings given its potential to capture market share gains due to the jewellery sector’s long-term growth potential, shift from unorganized to organized players, and diverse product portfolio.

Amit Sachdeva, India Equity Strategist (consumer and retail segment) at HSBC, for instance, believes the company is entering a high growth phase with a revenue CAGR of 19 per cent over the next decade.

"Titan looks well placed to gain market share (from current 6-7 per cent) due to its consumer trust, brand, compelling value proposition of pricing, and wedding focus. Besides, the shift from unorganised to organized, and foray in the international market and venture into new business such as Taneira (ethnic wear) makes a case of strong growth phase," he said in a co-authored report with Anurag Dayal and Rajesh Kumar.

Subsequently, the next decade should see strong growth, aided by network rollout and exponential penetration gains. Thereafter, in the second phase, growth rate should taper off to 15-16 per cent, Sachdeva said.

Analysts have upgraded the company’s earnings for FY22 and FY23, pencilling in broad-based sales recovery.

"We are increasing FY22/FY23 EPS estimates by 7.9 per cent and 3.9 per cent to Rs 21.7 and Rs 31.5, respectively and introduce FY24 EPS estimates at Rs 39.2," said Amnish Aggarwal, research analyst at Prabhudas Lilladher, in a co-authored report with Heet Vora and Rashi Vora.

Factoring in Q2FY22 net profit at Rs 610 crore, a growth of 205 per cent year-on-year, we estimate 45 per cent PAT CAGR over FY21-24. Further, we upgrade the stock to BUY (Accumulate earlier) with a target price of Rs 2,555 (Rs 1916 earlier), they said.

Those at Emkay Global, meanwhile, increased their FY23/FY24 EPS estimates by 8-12 per cent. "We expect Titan to report a solid 64% per cent YoY revenue growth to Rs 7,100 crore and a PAT of Rs 550 crore," they said.

Motilal Oswal Financial Services, however, expects margin to be impacted in Q2FY22 due to lower contribution of studded jewellery. However, the strong topline growth would still drive sharp EBITDA growth, it said.

Among global brokerages, JPMorgan has upgraded EPS target by 6 per cent over FY22-23 while Credit Suisse has upgraded the same by 8 per cent/5 per cent/5 per cent for FY22/23/24.

On Wednesday, Titan reported 78 per cent revenue growth in the jewellery segment in Q2FY22 compared to Q2FY21. In watches and wearables, its revenue was up 73 per cent compared to the July-September quarter of the previous fiscal.

Moreover, its Eyewear segment’s revenue was up 74 per cent, while other business segments, which includes - Taneira, Fragrances and Accessories, reported 121 per growth during the quarter.

Source: Brokerage reports