Jewelry gross sales up 37% y-y; perceived expensiveness of inventory deceptive, as it’s a structural winner; ‘Purchase’ retained with TP of `3,050
Progress was spectacular in Q3, beating expectations by a large margin: (i) Jewelry rose by 37% y-o-y on a comparatively excessive base (+16% final 12 months) pushed primarily by festive demand. Community rollout picked up tempo with addition of 14 new Tanishq shops (internet). (ii) Watches & wearables had been up 28% y-o-y led by Tier 2 and three cities and sustained restoration in walk-ins. (iii) Eyewear was up 27% y-o-y led by wholesome demand development and community growth. (iv) Taneira opened two new shops, taking its complete retailer depend to 16.
(v) CaratLane’s gross sales rose 64% y-o-y and it added six new shops. And (vi) Titan’s standalone gross sales had been up 36% y-o-y general, beating consensus by a large margin.Do you have to nonetheless purchase Titan? The inventory has run up 64% within the final 12 months, outperforming the Nifty 50 index (+26%) by a large margin and, whereas the shares now commerce at a FY23e PE of 76x, we nonetheless see Titan because the considered one of most engaging compounding tales and considered one of our prime Purchase concepts in India shopper. That is pushed by the distinctive persevering with efficiency of the Jewelry enterprise in addition to by the prospect of constructing large-scale new companies that ought to proceed to gasoline this assemble.
Key elements of Titan’s long run enchantment: (i) Lengthy-term compounding assemble is properly in place as Titan (c7% market share) appears properly positioned to seize worth from the jewelry sector’s giant unorganised dimension (pushed by its shopper belief, model, worth proposition of pricing, change affords, design, marriage ceremony focus) by gaining market share persistently. We pencil in 5-year Jewelry CAGR of 20%+.
(ii) Titan can also be constructing long-term development choices, together with rigorously selecting its worldwide foray and new companies comparable to Taneira, that are more likely to emerge as giant worth drivers within the subsequent 5 years. Titan’s eyewear enterprise is now on the trail of worthwhile and sustainable excessive development. (iii) We see the start of a powerful development section, pushed by community rollout (40+ shops each year), sturdy assist from marriage ceremony gross sales, revival in watches, eyewear, and development accretion from Taneira.
(iv) Perceived expensiveness is deceptive and is merely a mirrored image of the “lengthy length of development seize” that the market is keen to assign to profitable enterprise fashions comparable to Titan. On our framework, the market is pricing in 15-16% long-term earnings compounding, which is properly inside what Titan may ship and can possible seem even much less and fewer demanding as new companies comparable to Taneira scale up.Reiterate Purchase and carry TP to `3,050 from `2,900 as we revise our estimates and roll our valuation base ahead. Third COVID-19 wave is a key danger.
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