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Analyst Corner – Titan: Retain ‘buy’, raise TP to Rs 1,900 from Rs 1,830

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Titan is nicely positioned to seize worth from the long-term development potential within the jewelry sector

Q1 jewelry development impacted by COVID-19: 1) Jewelry development (excluding bullion gross sales) at 107% yoy (on final 12 months’s benign base) continues to be fairly spectacular in 1 / 4 disrupted by the second COVID-19 wave with solely 47% complete retailer operational days. Round 90% of shops are actually open, however one-third of those nonetheless face weekend lockdowns. 2) On a constructive word, regardless of decrease operational days, June gross sales have been higher than final 12 months. As well as, the division gained traction with new prospects, and recent enrolment within the Golden Harvest Scheme improved in yoy phrases, indicating a constructive demand outlook forward. 3) Regardless of lockdown, Titan nonetheless added 5 Tanishq shops on a web foundation in Q1. 4) Each Watches (gross sales up 280% yoy) and Eyewear (gross sales up 117% yoy) witnessed quicker restoration than final 12 months, aided by omni-channel presence and restoration in walk-ins. 5) Taneira shops have been operational for simply 30% of the full retailer days in Q1. 11 of its 14 shops are actually open. 6) Total, Titan’s Q1 gross sales have been up 117% yoy (ex bullion gross sales), which is spectacular, in our view, given the difficult backdrop of the quarter.

We anticipate a powerful rebound in demand: 1) Titan has managed the disruption comparatively nicely, and because the second COVID-19 wave subsides, and vaccination features tempo, a powerful income rebound is imminent, in our view, given the journey of restoration seen final 12 months, when jewelry gross sales persistently exceeded expectations. 2) The benign base for FY22, gradual demand restoration and continued community rollout (Titan added 26 shops in a disrupted FY21) nonetheless portend sturdy development in FY22e, which is able to proceed be a key catalyst for inventory efficiency, in our view.

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Market share acquire journey for Titan will speed up: 1) Titan is nicely positioned to seize worth from the long-term development potential within the jewelry sector (pushed by its shopper belief, model, compelling worth proposition of pricing, trade provides, design, wedding ceremony focus) by gaining market share persistently. 2) Necessary hallmarking (authorities has began phased implementation from 16 June 2021) now makes one other structural push to business transitioning in direction of organised commerce, the place Titan has a logical proper to win, with 100% of its jewelry hallmarked. Refer: Necessary hallmarking one other constructive catalyst, 25 Could 2021. 3) Titan can also be constructing long-term development choices, akin to Taneira (ethnic put on), which has begun nicely and has the potential to be a big worth driver.

Retain Purchase, new TP Rs1,900: The present share value builds in long-term earnings development expectations of c.15%, which we expect is an simply surmountable hurdle given Titan’s formidable place to seize the worth of the potential development within the section. We alter our estimates, enhance our TP to INR1,900 (from INR1,830), and retain a ‘Purchase’.

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