Titan Company dips 2% as Jewellery biz crawls in Q4 amid rising gold prices

Shares of Titan Company declined 1.6 per cent to Rs 2,500 apiece on the BSE on Thursday after the company reported sluggish growth in its jewellery business in March quarter of FY22 (Q4FY22).

At 9:20 AM, shares of the Tata Group company were quoting at Rs 2,521, down 0.8 per cent, on the BSE. In comparison, the BSE Sensex was at 59,301, down 0.5 per cent.

The company’s Jewellery Division ended the volatile quarter on a flat note over a strong Q4FY21 base. Business saw subdued activity in top cities due to the Omicron wave in January 22, a very strong resurgence in February, and again a drop in customer purchases in March on the back of sharp rise in gold prices and sentiment impact due to the external gee-political conflict.

“While walk-ins saw minor decline, the customer conversions and ticket sizes grew marginally for the quarter compared to the same period last year. Sales from top 8 cities grew in single digits while the rest of India saw a small decline. Though the plain jewellery category bore the brunt of gold volatility in March 2022 leading to a slight decline for the quarter, studded sales clocked in a high single digit growth, thereby partially cushioning the impact,” Titan said in its press release.

“Titan’s recurring Jewelry sales (excluding bullion/B2B sales) were flat yoy at about Rs 6,000 crore in Q4 versus the Street’s expectation of 15-16 per cent growth. It implies deceleration in 3-year CAGR to 15 per cent in Q4 from 22 per cent in Q3. While we do expect recovery in demand in Q1FY23, our revenue assumption for Titan’s jewelry business now implies 21 per cent/18 per cent year-on-year growth in FY2023E/24E. There is downside risk of about 1-3 percentage points to our FY2023-24E revenue growth expectations,” said analysts at Kotak Institutional Equities. They have ‘ADD’ rating on the stock with a target price of Rs 2,525.

Meanwhile, Watches/Eyewear segments grew by 12 per cent/5 per cent yoy versus the markets’ expectation of 15 per cent/34 per cent. Ethnic wear brand ‘Taneira’ launched two more stores, extending its presence to eight cities and taking total store count to 20. Further, increase in sales from department stores/ecommerce led by 21 per cent/67 per cent YoY growth in fragrances/fashion accessories.

“Titan has been among the biggest beneficiaries of the shift from unorganised to organised segment in jewellery. Given its brand heft, as also the trust that the Tata name evokes, the company has managed to outpace other large jewellers. We expect this trend of market share gains to sustain, driving its multi-decade growth. Furthermore, the company is currently only present in ~220 cities, and has a target to extend its presence to 500-plus over the next five years,” said a report by Edelweiss Securities.

The brokerage added: While the performance is below trend, it is attributable to one-off factors with the underlying structural growth unchanged. We believe, any correction in the stock will be an opportunity to buy.

The brokerage maintains its target EV/EBITDA at 65x (FY23E EBITDA) with an unchanged target price of Rs 3,065 and a ‘BUY’ rating.

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