PL Stock Report - Titan Company (TTAN IN) - Q2FY24 Result Update - Growth visibility remains strong; Accumulate - ACCUMULATE

Titan Company (TTAN IN) – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd

Rating: ACCUMULATE | CMP: Rs3,275 | TP: Rs3,387

Q2FY24 Result Update – Growth visibility remains strong; Accumulate

Quick Pointers:

§ Jewellery margins surprise positively, Marriage and festival season to boost demand in 2H24, Jewellery margin guidance maintained at 12.5-13%

§ Wearables sales up 131%, IRTH 31%, Taneira 64% & accessories 40%

TTAN 2Q24 PAT surprised positively, led by higher margins in Jewellery business. Sales momentum remained strong in Tanishq, Watch and wearables, Taneira, Caratlane and IRTH. we expect strong 2H for Tanishq given festival and marriage season given 22% LTL growth in a relatively lean period. Tanishq has taken small price correction in studded prices, although recent crash in global prices is unlikely to have any meaningful impact on margins. Watches LTL sales in WOT, Fastrack and LFS have been tepid showing rising share of margin dilutive online channel.

TTAN is nurturing multiple growth engines led by 1) Jewellery network expansion, regional thrust and sub brands like Mia, Zoya and Caratlane 2) Omni-channel strategy across jewellery, watches and eyewear 3) new segments wearables, dress material, handbags and fashion accessories. TTAN is a formidable play on emerging lifestyle segments which will gain from rising discretionary spends. TTAN trades at 58.9x Sept25E EPS with 17.3% EPS CAGR over FY23-26. Retain Accumulate with DCF based target price of Rs3387 (rollover to Sept25, Rs3312 earlier).

Standalone Revenues (ex of Bullion) grew by 20% YoY to Rs99.4bn. Gross margins contracted by 416bps YoY to 22.4%. EBITDA grew by 9.8% YoY to Rs13.6bn Margins contracted by 251bps YoY to 11.6% (PLe:12.3%) Adj. PAT grew by 9.7% YoY to Rs9.4bn (PLe: Rs9.7bn)

Jewellery revenues grew by 34.4% YoY to Rs103.3bn; EBIT grew by 9.3% YoY to Rs12.1bn; margins contracted by 268bps YoY to 11.7%. Margins excluding bullion sales declined 120bps to 14.1%. Studded ratio was 33% in Q2’24 up by 1% vs Q2’23. Tanishq added 10 stores, taking total count to 445 stores. Average bill grew/Buyer saw double digit growth YoY. while new buyer proportion at ~48% remained healthy. International expansion continues with focus shifting to non- Indian diaspora catchments with a target to achieve 25 stores by FY24.

Watches and Wearables revenues grew by 31.7% YoY to Rs10.9bn; EBIT grew by 30.1% YoY to Rs1.6bn; margins contracted by 19bps YoY to 14.7%. Premium brands continued their strong performance with Helios showing double digit growth in Q2. Wearables growth at ~131% YoY in 2Q.

Eyewear revenues grew by 12.6% YoY to Rs1.9bn; EBIT declined by 0% YoY to Rs280mn; margins contracted by 187bps YoY to 14.9%. International brands grew ahead of house brands while Lenses grew by 9% & Sunglasses grew by 47%. Fragrances grew 12% while women handbags grew 31%, Taneira sales grew 27.9%

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