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Titan aspiring to maintain combination of high return ratios, robust revenue growth

ICICI Securities 18 May 2022

What's Buzzing

Titan in its annual analyst and investor meet unveiled strong growth ambition across its business segments for the next few years.

Context

The management has charted out growth pillars for its core business (Jewellery & watches) and emerging concepts (ethnic, wearables and international business). Some of the key highlights are:

  • It aspires to grow jewellery revenues by 2.5x by FY27 (implied CAGR: 20%). The company believes that huge headroom for growth exists with its current market share
  • The company has high revenue growth targets for wearable categories (~6x) with ambition to grow the watches division to Rs 10000 crore in FY26 with 18% EBIT margins
  • Among emerging businesses, the management indicated that they believe its ethnic wear play under the brand Taneira has huge opportunity. The company has an ambition to increase the number of stores to 125 stores by FY27 (from current six) with potential revenue target of Rs 1000 crore (~1.5 million pieces). Also, it is planning to ramp up its women’s bag business through a combination of multiple channel driven growth strategy. The company is planning to sell 3.5 million bags by FY27 with revenue potential of Rs 1000 crore. Also, Titan is planning to open 30 jewellery stores at international locations and targeting a revenue of Rs 2500 crore by FY27

Our perspective

Titan Company’s management showcased its intent to grow its revenues at an accelerated pace across its portfolio of existing and emerging product categories. The management indicated that it would invest in its brands and expand retail foot print in regions where it has lower or no presence. Category wise focus on wedding and studded jewellery would continue with regionalisation of designs to capture higher share in markets where its market share is lower than its national average. The management believes that despite investing in brands and new initiatives the company will be able to sustain its margins with a positive bias due to the enhanced scale of business enabling operating leverage. The management highlighted that the company would be able to pursue a 15-20% organic growth through the internal accruals generated by the business. We believe Titan is well placed to continue to gain market share from unorganised players and recent regulatory changes like compulsory gold hallmarking is likely to accelerate the pace of market share gain for organised players. We expect revenue and earnings growth trajectory to be strong from hereon. Robust business model (30%+ RoCE) and strong earnings visibility will enable Titan to sustain its premium valuations, going forward.

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