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  • 04 May 2023
  • ICICIdirect Research

TITAN POSTS STEADY OPERATIONAL PERFORMANCE

TITAN - 3634 Change: -3.10 (-0.09 %)

News: As guided by the management in its pre-quarterly update, the jewellery division (excluding gold bullion sale in both the quarters) reported healthy growth of 25% YoY to Rs 8065 crore. Watches segment registered 41% YoY revenue growth to Rs 883 crore (three-year CAGR: 7%) with wearables sub-segment registering multi-fold increase YoY. Eyewear segment grew 23% YoY to Rs 165 crore. Overall consolidated revenues (including gold bullion sale: Rs 1055 crore) grew 33% YoY to Rs 10360 crore (I-direct estimate: Rs 9338 crore). Gross margins declined 100 bps YoY to 24.3% mainly owing to bullion sale (low margin) to the tune of Rs 1055 crore. Stringent cost control led to employee expenses and other expenses as a percentage to sales being lower by 66 bps and 55 bps YoY, respectively, which aided the margins of the company. Subsequently, EBITDA margins marginally improved by 30 bps YoY to 10.5% (I-direct estimate: 11.4%). Absolute EBITDA increased by 37% YoY To Rs 1089 crore vs. our estimate of Rs 1060 crore

View: The management indicated that demand for jewellery in the first half of April was subdued owing to volatility in gold prices but the same picked up during the latter half of April owing to robust sales during Akshay Tritiya. Further, demand is expected to be strong in May and June driven by the ensuing wedding season. Titan continues to be one the fastest growing discretionary companies (three year CAGR: 23%) 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. Sharp rise in gold prices and slowdown in discretionary demand could pose challenges in the near term, however long term story remains intact with company aspiring to grow jewellery revenues by 2.5x by FY27 (implied CAGR: 20% from FY22 base)

Impact: Positive