Aggressive expansion, higher demand to drive more gains for Titan

Firm's high-margin jewellery Q1 sales were comparable to pre-Covid-19 levels

The stock of the country’s largest jewellery maker by market capitalisation, Titan, was up 5.7 per cent after it posted a better than expected June quarter performance.

On a low base, jewellery sales for the company more than tripled in what it described as the first near-normal quarter after a gap of two years. The 207 per cent growth was aided by strong sales on Akshaya Tritiya in May.

While plain gold jewellery sales were up nearly three times, the performance of the higher-margin studded jewellery segment too was better than what it was a year ago and, also comparable to pre-Covid-19 levels. While the ticket size went up marginally year-on-year (YoY), buyers and walk-ins grew in line with the revenues.

Though the wedding segment underperformed the overall revenue growth, its share in the revenue pie remained stable. What is aiding growth is new store additions and expansion of its network. With the addition of 19 outlets in the first quarter of 2022-23 financial year (Q1FY23), the total store count for the jewellery division has improved to 463.

Given the strong show in Q1FY23, Prabhudas Lilladher Research has increased its earnings estimates for FY23 and FY24 by 16.6 per cent and 13.4 per cent respectively. Analysts, led by Amnish Aggarwal of the brokerage, say that the company’s growth strategy is playing out with aggressive store expansion, focus on wedding segment and lighter jewellery and designs/campaigns to cater to regional tastes and preferences.

The wedding season aided the growth in the watches and wearables division which reported its highest-ever quarterly revenues that culminated in a 158 per cent growth with contributions coming from all brands and products.

The eyecare division also saw a 178 per cent growth YoY, helped by 56 new stores; the company has a target of 1,000 Titan Eye Plus stores in India by the end of FY23.

For Motilal Oswal Research, the stock remains the top pick in the large cap consumption space with strong earnings growth visibility and compounding by 20 per cent for an elongated period of time.

Most brokerages highlight the improvement in demand as well as the scope for market share gains for Titan given weaker competition, especially in the unorganised segment and the company’s aggressive expansion.

At the current price, the stock is richly valued at over 50 times its FY24 earnings estimates. Investors will have wait for better entry points for sizeable returns.