In its preview of Q2FY21, the management indicated that Titan’s jewellery division saw a sharp recovery in Q2FY21 signifying the inherent strength of the business model. Jewellery sales have now reached 98% of pre-Covid levels (on a comparatively lower base), which were higher than the management’s expectations of 80% recovery rate. Despite various headwinds, Titan continued on its store addition spree by opening 14 Tanishq stores in H1FY21 (eight stores added in Q2FY21). The liquidity stress faced by regional unorganised players can play out as an opportunity for Titan. Titan’s healthy balance sheet will enable it to capture market share growth opportunities through healthy store additions. Watches division recovery is sluggish with sales reaching 55% of pre-Covid levels in Q2FY20 (September: 70%). Sustained investments over the last three years to enhance digital presence have started yielding positive results during tough times. Going forward, the overall demand trend for the festive season in Q3FY21E appears positive.
OutlookWe upgrade the stock from HOLD to BUY with a revised target price of Rs 1450 (50.0x FY23E EPS, previous TP: 1170).
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