MOSL: TITAN COMPANY (Buy)-Healthy growth momentum across key businesses

Titan Company: Healthy growth momentum across key businesses; Maintains guidance of strong Jewellery growth in FY19

(TTAN IN, Mkt Cap USD11.8b, CMP INR932, TP INR1125, 21% Upside, Buy)

TTAN has released its pre-quarterly update for 3QFY19. Key highlights:

• Jewellery segment capitalized well on seasonal strength to report robust growth in 3QFY19. Management cited that the segment expanded its market share on account of robust same-store sales growth.
• Watches saw another strong quarter, which was also supported by its brand-building activities across channels.
• Prescription Eyewear business also sustained growth momentum due to its strategy of offering more assortments at affordable price points and aggressive marketing spends. The frame distribution business is making good progress.
• We maintain our Buy rating on TTAN with a target price of INR1,125 (valued at 47x Dec’20E EPS, 10% premium to three-year average multiple because of strong earnings growth prospects – 26% EPS CAGR over FY18-20E).

Jewelry – consumer demand was encouraging this festive season

• Management stated that the category continued delivering a strong performance on account of rapid store expansion, increasing affluence of customers in middle India, and strong consumer demand on account of the festive season of Diwali-Dussehra. TTAN expects Jewellery revenue to grow ~22% for full-year FY19.
• The company also indicated that same-store sales growth remains very strong and that market share gains continue.
• In 3QFY19, TTAN added 11 new Tanishq stores (65k sq. ft. of retail space added in 9MFY19), taking YTD openings to 27 stores. It closed three stores in 9MFY19.