- 08 Aug 2022
- ICICIdirect Research
Multiple levers enable strong show for Titan in Q1FY23TITAN - 2515 Change: -0.15 (-0.01 %)
News: Titan reported a healthy operational performance with strong beat on the margins front. As guided by the management in its pre-quarterly update, the jewellery division (excluding gold bullion sale in both quarters) reported robust sales growth of 204% YoY to Rs 7995 crore (impressive three year CAGR: 24%). Share of studded ratio surpassed pre-Covid levels with contribution increasing 400 bps YoY to 26.0% (Q1FY20: 25%). Watches segment reported 169% YoY growth to Rs 786 crore (110% of pre-Covid levels), whereas eyewear division reported 173% YoY growth to Rs 183 crore (123% of pre-Covid levels). Overall consolidated revenues (including gold bullion sale: Rs 356 crore) grew 172% YoY to Rs 9443 crore (I-direct estimate: Rs 9329 crore). Owing to better studded mix and positive operating leverage, EBITDA margins expanded significantly by 870 bps YoY to 12.7% (Q4FY22: 10.2%, I-direct estimate: 11.3%). Absolute EBITDA was at Rs 1196 crore (higher than our estimate of Rs 1054 crore) with robust three year CAGR of 28%.
View: Buoyed by strong festive/wedding season and a normalised quarter after a gap of two years, jewellery division registered its second highest ever quarterly revenues in Q1FY23. Titan continues to be one the fastest growing discretionary companies (three year CAGR: 21%) in our retail coverage universe. Robust performance in challenging times reaffirms our thesis of long term market share gains for Titan. It has, over the years, withstood challenges and emerged as a resilient player. We believe Titan is a structural growth story and appears to be a key beneficiary of the unorganised to organised shift in the Indian jewellery market. Capital employed for jewellery division has reduced sharply by 27% QoQ to Rs 3891 crore, which is expected to result in strong FCF generation in Q1FY23 (Titan had significantly ramped its jewellery inventory in Q4FY22).