Motilal Oswal's research report on Titan Company
Titan Company’s (TTAN) sales for 2QFY22 were in-line (up 64.6%) at INR74.9b, although the operating margin at 12.9% for the quarter (est. 10.7%) came as a positive surprise and stood at its second-highest level since 2QFY06. This led to EBITDA and PAT surpassing our estimates by more than 20%. What was even more remarkable was that this margin improvement was achieved in a quarter that still did not see the contribution from Studded jewellery returning to normal levels and witnessed low margin bullion sales as well. Nevertheless, the sharp increase in sales is likely to have helped TTAN on the operating leverage front. Management has stated that it aims to keep jewellery margins in the 12-13% range. Jewellery outlook remains good as well, given the healthy festive season commentary. Management has also indicated significant expansion plans in the company’s smaller businesses like Eyewear and Taneira. Maintain Buy.
At its current valuation of 79.3x FY23E EPS, the stock’s near-term multiples appear expensive, although its long runway for profitable growth warrants premium multiples. TTAN remains our top pick in the discretionary consumption space. We maintain our Buy rating with a TP of INR2,830 per share (70x FY24 EPS).
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