Titan Q3 Results Review - Broad-Based Growth; A Miss On Margins: Motilal Oswal

Motilal Oswal Report

Titan Company Ltd. posted sales growth of 22% YoY in Q3 FY24, largely in line with our estimate. This was driven by a 22% surge in jewelry sales, attributed to the festive season, which resulted in double-digit growth in the number of buyers. Studded revenue rose 14% YoY only, due to soft demand in December 2023.

The watch segment grew 22% YoY, well supported by the premiumisation trend. Analog watches rose 18% YoY while wearables grew 65% YoY.  Jewelry Ebit improved 19% YoY, which was lower than expected due to a slow growth in studded jewelry. The Ebit margin was at 11.6%, down 30 basis points YoY. The studded ratio was at 24% in Q3 (versus 26% YoY), leading to a miss on margin.

Gold reported 16% YoY inflation that intensified competition, leading to higher consumer offers to protect market share.

We model 15% revenue compound annual growth rate with an Ebitda margin of ~11-12% during FY24-FY26E. In a slower consumption environment, the jewelry category growth is still outperforming.

We will watch the near-term consumption trend, but will continue to like Titan for its best-in-class execution track record and its hunger to keep expanding the user base.

Consumers’ preference towards branded Jewelers will continue to keep the category growth rate at an attractive level. Reiterate 'Buy' with a target price of Rs 4,200.

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