Buy Titan Company; target of Rs 1410: ICICI Direct

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26 Aug, 2025 12:21

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Titan’s jewellery division witnessed a strong rebound in Q2FY21, signifying inherent strength of the business model. As guided by the management in its pre-quarterly update, jewellery sales have reached 98% of pre-Covid levels (on comparatively lower base, LTL: 90%). Including bullion sale of Rs 391 crore, revenue for jewellery division grew 7.2% YoY to Rs 3983 crore. Healthy demand for plain gold jewellery, gold coins arrested grammage de-growth in Q2FY21 that was at 31% (vs. de-growth of 81% in Q1FY21). Watches division recovery is sluggish with sales reaching 55% of pre-Covid level in Q2FY21 (September: 70%). Revenue for division de-grew 44% YoY to Rs 401 crore. Overall revenues fell 2% YoY to Rs 4553.0 crore. Due to unfavourable product mix (decline in share of studded ratio), reported EBITDA margins fell 430 bps YoY to 6.9% (underlying EBITDA margins: 7.7%, adjusted for ineffective hedges), with EBITDA down 40% YoY to Rs 313 crore. Provision of Rs 34 crore towards overdue margin money from a broker also impacted profitability. Going forward, overall demand trend for festive season in Q3FY21E appears positive with high single digit growth seen in first 10 days of festive period (but cannot be extrapolated for festive season).

We maintain our revenue estimates but reduce our earnings estimates by 10%, 4% in FY21, FY22E, respectively, to factor in near term pressure on gross margins. We build in revenue CAGR of 13% in FY20-23E, mainly driven by growth in jewellery segment (15% CAGR). RoCE is expected to revert back to 30%+ levels by FY23E. We maintain BUY with a revised target price of Rs 1410 (50.0x FY23E EPS, previous TP: Rs 1450).

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