Titan Company: Q3 revenue growth broadly in line with expectations; long-term triggers intact
By The Moneycontrol
The company posted double-digit growth across business segments, reporting an overall standalone business growth of 12 percent year on year (YoY) in the December 2022 quarter
Highlights
- Broadly in-line sales performance in Q3FY23
- All segments grow in double-digits
- Watches, emerging business divisions outperform
- Among our preferred picks in the retail space
Valuations
We have broadly retained our earnings estimates, given the broadly in-line revenue performance for December 2022 quarter.
At the current market price (CMP), the stock is trading at a P/E of 58 times its FY24 projected earnings.
Valuations are at a discount to medium-term historical averages and provide good scope for re-rating.
We retain our positive stance and recommend investors add the stock to their portfolio.
Titan Company (Titan; CMP: Rs 2,537; Market cap: Rs 2,25,227 crore) has released its December 2022 pre-quarter business update.
The company has posted double-digit growth across business segments, reporting an overall standalone business growth of 12 percent year on year (YoY) in the December 2022 quarter.
Sales were driven by good demand in the festive season and positive consumer sentiments. Titan maintained a healthy growth despite a high base in the corresponding quarter last year.
Both subsidiaries – Titan Engineering and Automation Carat Lane posted robust growth, aiding the overall growth momentum for the company.
Titan has a huge runway for growth in the key jewellery segment, given the healthy consumer sentiments and mandatory hallmarking regulations (sale of certified jewellery), which provide a huge opportunity for market share gains for organised players like Titan.
New launches and network expansion in non-jewellery segments, like watches and wearables, eyewear as well as emerging categories (fashion accessories, fragrance and dresswear) provide ample growth opportunities for Titan.
Overall, we expect continued healthy double-digit growth for Titan in the medium to long run.
Titan has a strong brand pull and parentage and is among our preferred picks in the retail space.
Jewellery segment
The jewellery business (ex-bullion) reported a healthy 11 percent YoY growth during the December 2022 quarter. Healthy new buyer growth in the festive season, higher value purchases in the studded category as well as the launch of unique collections enabled the company to post a double-digit growth.
Sales of studded jewellery were moderately higher than those of plain gold jewellery. The growth in the wedding segment was in line with the growth in the overall segment.
Tanishq opened its first boutique store in the United States (New Jersey) in December 2022.
Titan now has six stores in the international market and it is present in Dubai, Abu Dhabi as well as the US.
Titan opened eight net new Tanishq stores and 14 Mia stores in Q3FY23.
Watches and wearables
This segment marginally outperformed the overall standalone business, reporting a 14 percent YoY growth in the December 2022 quarter, led by a strong growth in the wearable segment.
The wearable segment sales more than tripled, on the back of a slew of exciting product launches that led to strong sales in the festive period of the quarter.
Product launches, campaigns and activations as well as strong growth in the premium category enabled good demand for key brands in the analog watch category.
Titan added 24 net new stores of Titan World, 17 of Helios and seven of Fastrack brand during the quarter.
Eyecare and emerging business
The eyecare business reported a 10 percent revenue growth during the December 2022 quarter.
Sales from both company stores (Titan Eye+) as well as trade and distribution channels were in line with the overall growth in the segment.
Titan added 36 new stores on a net basis during the quarter.
Titan’s emerging business maintained strong growth momentum, growing 75 percent during the December 2022 quarter.
The fragrances and fashion accessories business reported a 39 percent growth with the fragrances division growing by 50 percent and fashion accessories growing by 21 percent.
Sales were led by the trade and large-format stores.
Titan launched the IRTH brand of women handbags during the quarter.
The sales of Indian dresswear (Taneria) grew 150 percent, driven by both new store openings as well as healthy growth in existing stores.
Taneria received a good response in the festive season and the company opened five new stores during the quarter, taking the overall store count to 36.
Subsidiary performance
Wholly owned subsidiary Titan Engineering and Automation grew strongly, at 58 percent YoY, with both the divisions — Automation Solutions as well as Manufacturing services (aerospace and defense) — clocking strong growth.
Titan’s 72.3 percent subsidiary, Carat Lane, also reported robust growth of 50 percent, driven by gifting campaigns around the festive season.
Studded jewelry growth was moderately higher than the overall growth, contributing 75 percent to overall revenues.
