MOSL: TITAN COMPANY (Buy)-A gem that’s getting even more lustrous-High earnings growth with strong visibility

Titan company: A gem that’s getting even more lustrous; High earnings growth with strong visibility deserves premium valuations

(TTAN IN, Mkt Cap USD12.6b, CMP INR921, TP INR1225, 22% Upside, Buy)

We attended Titan’s (TTAN) Annual Investor Forum 2018. Key takeaways:

 Jewelry growth prospects improving

• Management remained confident about the Jewelry segment growth prospects and reiterated its recently revised growth guidance (expects 2.5x growth – 20% CAGR – in the segment over FY18-23, as against the previous guidance of 2.5x growth over FY17-22). The company confirmed the 25% Jewelry segment growth target for FY19, exhibiting confidence about growing rapidly despite the previous year’s strong performance (+25% in FY18). Jewelry growth is likely to be muted this quarter because of an extremely high base (50%+ growth in 1QFY18), but the rest of the year is likely to be good enough to compensate for that. Management also cited that the competitive advantage versus peers is getting bigger over the past few quarters.
• Management quantified its five key pillars of growth for the first time.
  • Wedding jewelry sales proportion is likely to increase from 35% of jewelry sales in FY18 to 50% by FY23.
  • High-value diamond jewelry sales proportion is likely to increase from 30% of diamond jewelry sales in FY18 to 50% in FY23. In these premium categories, the company is targeting customers with annual income of INR1-5m, a segment that the Central Board of Direct Taxes expects to grow at a 23% CAGR over the next five years.
  • Golden Harvest: It continues to be one of the key pillars.