After strong Q1 performance, outlook remains robust for Titan Company

But valuations rich after the run-up in the last three months

Better than expected performance in June quarter of the 2023-24 financial year (Q1FY24) and a robust outlook led to 1.2 per cent gain in Titan Company stock on Friday. The firm reported 20 per cent growth in revenues, aided by double-digit rise in its major consumer segments.

Jewellery, its largest segment, accounting for about 90 per cent of its sales, stood out with a growth of 21 per cent over the year ago quarter. Its revenue growth over the last five years stood at 22.6 per cent while the same over the last four years was at 24.8 per cent, points out Motilal Oswal Research.

Revenues in the segment, which exclude bullion sales, were almost double that that of estimates. While there was volatility in gold prices, sales performance was led by Akshay Tritiya in April and the wedding season in June. Buyer (volume) growth was higher than average ticket size growth in Q1FY24.

The company highlighted that key categories of gold and studded jewellery grew well with no notable change in the overall product mix. In addition to this, opening of new stores, golden harvest and exchange programs continued to do well during the quarter, it added.

In the jewellery segment, it added 18 new stores, taking the total to 559.
 

The jewellery performance was encouraging at a time when there was a significant rise in gold prices, pointed out Amnish Aggarwal, head of research, Prabhudas Lilladher Research. From its lows in March, gold prices in Mumbai were up 12 per cent to its peak in May before shedding half the gains. The brokerage has a ‘buy’ rating on the stock with a target of Rs 3,242 a share.

While overall growth in the watches and wearables segment was up 13 per cent, it was led by an 84 per cent growth in wearables. The company added 26 new stores across formats taking the total to 1,031 stores. In the quarter, higher growth among channels came from Helios, large format stores and e-commerce.

The eyecare segment reported a growth of 10 per cent, aided by better growth from the trade channel as compared to Titan Eye+. The company added seven new stores in the quarter, taking the total in the segment to 908 stores.

Most brokerages remain bullish about the prospects of the largest listed jewellery player. The company, according to Motilal Oswal Research, has ample opportunities for growth, given its sub-10 per cent market share in jewellery and the ongoing challenges faced by its unorganised and organised peers. The brokerage has a ‘buy’ rating with a target price of Rs 3,325.

At the current price, the stock, which has gained 22 per cent over the last three months, is trading at 70 times its FY24 earnings estimates. Given the single, mid-single digit returns from the current price, investors can consider the company on dips.