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MOSL: TITAN COMPANY (Neutral)-Ambitious 20% CAGR targeted in Jewellery-Fair valuations limit upside

​Titan Company: Ambitious 20% CAGR targeted in Jewellery; Fair valuations limit upside

(TTAN IN, Mkt Cap USD6.3b, CMP INR471, TP INR505, 7% Upside, Neutral)

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

Focus on growth while sticking to core values: Management highlighted that TTAN will be aggressively eyeing for growth over next five years. Growth will be supported by the shift in consumer preference toward organized brands at a time when unorganized players are expected to come under pressure post GST implementation. The future will also see a focus on new opportunities/businesses (smart watches, fragrances, silk sarees, ecommerce, etc.). However, growth might come at expense of margins as it will be primarily driven by the lower-margin wedding jewellery segment. The impact on margins is expected to be offset by growth in high-margin studded jewellery, cost efficiencies and leverage effect to some extent. Besides, FY18 will see a more calibrated store expansion strategy relative to FY17 in all business segments.

Jewelry – aiming for 2.5x growth by 2022: Opportunities likely to drive 20% CAGR by 2022 in Jewellery will remain the same, but what is expected to change is the aggression to capture these opportunities. For Tanishq, wedding jewellery segment will be driven by change in inventory levels & mix to compete with regional players, differentiated designs, setting up of Hub stores (which will have a wedding zone inside the store), investing in expert salespeople as well as in branding & marketing. Studded jewellery also remains an important segment driving growth and margins. The focus on cities where its market share is lower than overall 5% national market share (such as Kolkata and Chennai) is also increasing, and also on key areas within a city where market share is lower than it should be. The company aims to open 27 new stores in 19 towns in FY18 as part of this initiative. There will be a greater focus on locally popular products in these stores. Golden Harvest Scheme (GHS) is expected to contribute 19% of total jewellery sales for the next year.