Ace investor Rakesh Jhunjhunwala’s portfolio stock Titan has plunged 16% so far this year underperforming NSE Nifty 50 which has plunged 9.5%. However, the Tata Group company share price is expected to rally 39% going forward on the back of strong earnings, jewellery business, eye care business and watches & wearables segment growth, according to Motilal Oswal Financial Services. Titan is clearly the leader among organized players in leading the growth in jewellery industry. “Its runway for growth is long, with a market share of just around 6%,” the brokerage said. Titan Company shares were trading at Rs 2,140, up 2.34% on BSE intraday.
Rakesh Jhunjhunwala owns 3.5 crore shares while his wife Rekha holds 95 lakh shares of Titan, per the latest shareholding pattern data. The couple collectively held 5.05% stake in the company till quarter ended March 2022.
Jewellery business: Huge headroom for growth
Titan’s jewellery business has posted a healthy CAGR of 18% over the last five years, despite COVID-led disruptions. Its EBIT CAGR has been even stronger at 24% over the same period. On the other hand, the increase in sq. feet and store count have posted a CAGR of 9% over the past five years, suggesting that half the growth during this period has come from SSSG which is very encouraging.
Analysts at Motilal Oswal believe that the business still has huge headroom for growth with just a 6% market share of the Rs 4 lakh crore segment. Furthermore, it has a much lower share in the weddings, solitaire, and high value studded segment. Titan on Friday said it is aiming at a growth of 2.5 times in its flagship jewellery business in the next five years. It plans to add over 600 stores across 300 cities in the next three years. Stating that the Indian jewellery market is seeing a shift and is formalising, Titan said the trend is “favouring organised players”.
Watches and Wearables: Growth in both Premium, Luxury segment
Trends post pandemic show that the premium segment recovered before the mid-market segment, smaller towns recovered before larger towns , and there has been a boom in online sales. The management is optimistic about the analog Watch segment. Gifting and outdoor occasions which had been significantly affected in the preceding couple of years are seeing a revival which is a positive for the company. Titan’s watches and wearables business is witnessing growth in both the Premium and Luxury segment as well as the mass sub-Rs 1,000 segment.
Titan World has been reimagined to be positioned as a much more premium offering. The Tata Group company renovated 130 stores in FY22 while adding 60 stores and it aims to add 130 stores in FY23. The new format now covers 60% of the network. Wearables is touted to be an Rs 9600 crore market in FY23. Titan is present in the Rs 4,000-15,000 price point, analysts added.
Eye Care: Next two years expected to be transformational years
Analysts at Motilal Oswal noted that the next two years are expected to be transformational years for Titan’s Eye Care business. The company has shifted its focus towards ‘Eye Care’ v/s just eyewear. Lately, there has been a slew of innovations, including anti-fog, anti-viral, lens technology, as well as perfecting the fit of frames for Indian faces. The business has worked towards becoming leaner by closing four lens labs and exiting from LFS and CSD formats. Fastrack frames were also launched targeting youth online and now the company is launching its first physical store. Titan eye+ opened 180 new stores in FY22 and has a total count of 760 stores, which are all mostly franchised. The company has identified an addressable user base of 200 million. The management aims to double frame production and deliver 45% lens capacity growth in FY23. Titan aims to open two stores in Dubai by the end of FY23.
Initiatives that may potentially drive future growth
Titan aims to achieve Rs 1000 crore in sales for women’s ethnic wear by FY27 with 125 stores across the country. It intends to evibe the saree, especially among young women, and will like to offer contemporary, elegant and differentiated designs. Taneira’s network is 90% a franchisee model. While the salience of sarees to Taneira’s business is currently 93%, it is expected to move toward 75% by FY27 as other Ethnic wear like lehengas, salwar kameez, etc. begin to sell. Women’s handbags will see a launch in FY23 under the Fastrack brand and the target is to achieve Rs 1000 crore sales by FY27.
Stock talk: Top pick in the largecap Consumption space in India
Titan Company shares remain Motilal Oswal’s top pick in the largecap Consumption space in India, with strong earnings growth visibility and compounding ~20% for an elongated period of time. “In the Jewelry industry, which is organizing at a rapid pace, Titan is clearly at the vanguard among organized players in leading this growth. Its runway for growth is long, with a market share of just 6%. Unlike other high growth categories, the competitive intensity from organized and unorganized peers in Jewelry is considerably weaker. Expensive valuations in the near term will get burnt off by a rapid pace of growth,” the brokerage said in its report. It maintained a ‘buy’ rating on the stock with a target price of Rs 2,900, implying 39% upside.
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