Management Speak: Titan Company (Outperformer) - Strategy in motion to maintain accelerated growth trajectory!
We present key takeaways of our interaction with Titan Company from its annual analyst meet. Titan management reiterated its FY23 revenue target and remains upbeat about growth potential and key initiatives taken across segments to achieve the same. It expects 25% sales growth in FY19 for the jewellery business and with several interventions in place as well as improved competitive position, it remains positive about its journey to increase jewellery sales by 2.5x over FY18-23E. Further uptick in watches segment and step up in investment in Eyewear business will drive the overall revenue growth for the company. This coupled with benefit of operating leverage will aid margins and drive overall earnings growth. We maintain our outperformer rating for the stock with a target price of Rs1085.
Building capabilities to drive future growth - Management reiterated its vision of Rs500bn sales (at consumer prices) and 50m consumers by FY23, led by growth across key segments. It is focusing on creating a future ready organisation by enhancing capabilities with investment in areas of consumer insights, design integration, digital media and leadership development.
Strong momentum in jewellery to continue - Titan maintained its long term guidance of the growing jewellery segment sales 2.5x over FY18-23E and expects 25% sales growth for FY19. Strengthened competitive position, accelerating reach in middle India, share gains in low market share cities, increasing contribution of wedding & studded jewellery and customer acquisition initiatives (new exchange policy, marketing investments) will drive the growth for the division. While gross margin expansion is unlikely given the revised exchange policy, benefit of operating leverage will drive EBIT margin expansion for the division.
Investing behind non-jewellery segment – Management targets to further improve performance of Watch division led by new launches/ renovation across key brands, network expansion and scale up in smart watch segment. This coupled with premiumisation and focus on cost efficiencies will aid overall profitability of the segment. In the Eyewear segment the strategy is to break the premium brand perception & drive customer acquisition through launch of affordable products and step up in marketing investments.
Titan is engaged in the watch division where Co. manufactures and sells a variety of watches with varying price range within India and overseas; in the jewelry division where Co. works through Tanishq and Zoya. Tanishq has a range of jewelry studded with diamonds or coloured gems in 18 kt gold, 22 kt pure gold and platinum; and Zoya is a chain of luxury jewelry boutiques; in the eyewear division where Titan Eye+ retails products which showcase contemporary designs, coupled with optical exams with Sankara Nethralaya; and in the precision engineering division, Co. sells its components globally and helps build machinery.
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