Asia Pacific Research - July 21, 2023

Equity Research Report

Titan Company Ltd

The Jewellery Giant, retain BUY!
About the Company Reco : BUY
Titan Company Ltd is among India’s most respected lifestyle companies that CMP : Rs 2978
mainly manufactures fashion accessories such as jewellery, watches and Target Price : Rs 3300
eyewear. The business, which is a member of the Tata Group and was initially Potential Target : +10.81%
a joint venture with TIDCO, has its corporate headquarters in Bangalore's
Electronic City and its registered office in Hosur, Tamil Nadu.
Stock Data (as on 21 July 2023)
Nifty 19,745
They offer jewellery products, such as pendants, chains, earrings, finger rings 52 Week H/L (in Rs) 3,210 /2,261
and neckwear. Titan offers a range of spectacles, such as frames and ready Market Cap (in Rs/USD mn) 2642310 /32232.14
readers, as well as sunglasses. The company offers its products under the Outstanding Shares (mn) 888
brands Tita, Titan Clock, Fastrack, Sonata, Zoop, Octane, Xylys, Helios, Titan Dividend Yield (%) 0.34
Raga, Favre-Leuba, Nebula, Tanishq, Mia, Zoya, CaratLane, Titan EyePlus, Skinn NSE Code TITAN
and Taneira.
Stock Performance (1 year)
The company provides services in the area of franchising, distribution and
licensing also. Nifty Titan

Q4FY23 – Result Synopsis

The company recorded revenue growth of 25% in Q4FY23 compared to

Q4FY22 on s standalone basis.

The Board of Directors of the company at its meeting held on May 3, 2023, has Jul-22 Oct-22 Jan-23 Apr-23 Jul-23
recommended a dividend of ₹10 per equity share for the year ended 31 March
2023. 1M 3M 1Y
Absolute Return 0.84% 16.66% 30.92%
Segment-Wise,
The jewellery segment recorded a total revenue of Rs 7576cr, an EBIT of Rs
Shareholding Pattern (June, 2023)
997cr and a YoY growth of 23.5%. The Indian business grew by 21% in the
same period. Promoter 52.90%
FII 18.50%
DII 10.60%
Gross margins declined by 100 bps YoY to 24.3% mainly owing to bullion sale
Public 17.90%
(which is low margin)

The watches and wearables segment recorded a total revenue of Rs 871cr Financial Summary
with an EBIT of Rs 98cr. The revenue from domestic operations grew up to Rs. (in mn) FY23 FY24E FY25E
41% YoY. Net Revenue 405800 481900 574100
YoY Growth (%) 40.90% 18.80% 19.10%
The Eyewear segment recorded a total revenue of Rs 165cr with an EBIT of Rs
EBITDA 48800 60400 73500
2cr. The segment grew 22.8% YoY.
EBITDA Margin (%) 12% 12.50% 12.80%

Emerging Businesses comprising of Fragrances and Fashion Accessories PAT 32700 40500 49900
(F&FA), and Indian Dress Wear (Taneira) clocked a revenue of Rs 77cr and a YoY Growth (%) 49.56% 23.85% 23.21%
growth of 83.9% in Revenue YoY. ROE (%) 30.80% 30.60% 30.70%
EPS (INR) 36.8 45.6 56.1
Within this, F&FA clocked 31% growth YoY whereas Taneira grew by ~200% P/E 72.2 58.3 47.3
YoY.
P/BV 19.8 16.1 13.2
Source: Motilal Oswal, The Valuation School Research
The company’s PAT grew by 39% YoY to Rs 736.0 crore and EBITDA margins
marginally improved by 30 bps YoY to 10.5%.
Prepared by Deep Maru
The company opened 173 new stores this quarter. Guided by CA Parth Verma
1
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Exhibit 1: Quarterly Snapshot :

Particulars (Rs. Cr) Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 %QoQ
Revenue 3,473 7,493 10,037 7,796 9,443 9,163 11,609 10,360 32.9%
COGS 2,154 4,609 6,118 4,432 5,748 4,996 7,337 6,576 48.4%
Gross Profit 1,319 2,884 3,919 3,364 3,695 4,167 4,272 3,784 12.5%
Gross Margin (%) 38.0% 38.5% 39.0% 43.2% 39.1% 45.5% 36.8% 36.5% (660bps)
Staff Cost 313 317 324 395 387 392 411 457 15.7%
Depreciation 95 104 98 102 103 106 113 119 16.7%
Other Op Expense 49 135 208 198 218 224 273 251 26.8%
Operating Income 137 968 1,442 794 1,196 1,247 1,347 1,089 37.2%
OPM (%) 3.9% 12.9% 14.4% 10.2% 12.7% 13.6% 11.6% 10.5% 30bps
Interest 49 51 57 61 65 60 79 96 57.4%
Other Income 46 55 57 76 44 61 89 114 50.0%
PBT 39 868 1,344 653 1,072 1,142 1,244 988 51.3%
Tax 21 227 332 126 282 307 332 252 100.0%
PAT 18 641 1,012 527 790 835 912 736 39.7%
Source: Tijori Finance, The Valuation School Research

Exhibit 2: Supplemental Metrics :

Particulars (Rs. Cr) Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Trend
EBITDA 137 968 1,442 794 1,196 1,247 1,347 1,089
EBDT 134 972 1,442 755 1,175 1,248 1,357 1,107
EBIT 88 917 1,385 733 1,131 1,187 1,268 993
Basic EPS 0 7 11 6 9 9 10 8
Net Profit Margin 0.5% 8.6% 10.1% 6.8% 8.4% 9.1% 7.9% 7.1%
Effective Tax Rate (%) 53.8% 26.2% 24.7% 19.3% 26.3% 26.9% 26.7% 25.5%
Source: Tijori Finance, The Valuation School Research

Exhibit 3: Key Ratios Movement :

Particulars Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23
EV/LTM Total Revenue 10x 9x 8x 8x 6x 6x 6x 5x
EV/LTM EBITDA 103x 79x 65x 65x 53x 50x 51x 48x
EV/LTM EBIT 114x 88x 73x 75x 52x 49x 50x 48x
P/E (Trailing 12m) 160x 145x 128x 100x 82x 78x 72x 73x
P/Normalized EPS 159x 150x 126x 101x 82x 77x 72x 72x
P/BV 23x 25x 29x 30x 24x 23x 23x 24x
Source: Screener.in, The Valuation School Research

2
Asia Pacific Research - July 21, 2023

Titan Company Ltd

Earnings Conference Call Q4FY23- Key Highlights

Jewellery Segment:
• Sales had decreased in March followed by first half of April due to high gold prices but as soon as the festive period and
the offers for Akshay Tritiya started, a lot of people came in and purchased jewellery.
• The management has decided to not follow the "One Nation, One Gold Price" policy which is followed by the
competitors, and they will proceed with the rates declared by the Local Jewellery Associations.
• Because of this they have seen a gradual decrease in the gold rate premium which they have been trying to manage
through product mix, making charges and other initiatives.
• The jewellery segment had an overall buyer growth of around 16%, also 10% on each store basis and same store sale
growth of 19% shouldn't be prioritized because of inflation in gold prices.
• Majority of the new customers purchase gold and lie in the price band of sub-Rs 50000 levels.

Watches & Wearables & Eyewear Segment:

• Strong Revenue growth in this segment was a result of previous investments and the management has guided that the
margins are likely to remain in the range of 12%-13%
• Margins in the wearables business is slightly lower than the watches segment due to tough competition from its rivals.
• In the eyewear segment, the company is looking forward to open another 100 stores in the coming 8 to 10 months.

Further Segmental Details:

• Mia has done exceptionally well, and it has shown a growth of 3x this year. In terms of numbers, currently it is standing
at 730-740cr and the management is expecting Mia to hit 1300-1350 in the coming year.
• About 40% of the business is contributed by Mia standalone stores and the management is looking forward to double
the current 110 store in the coming years.
• There is opportunity for 100 new Tanishq stores in the next two years. However, the company would be adding 30-40
new stores per year for the next two years and would be expanding a few retail stores
• The company is targeting double-digit same store sales growth in the jewellery segment
• Digitally influenced sales in Q4 was roughly around 18%

Dividend & Franchise:

• The terms of trade between the principal and the franchises ensure healthy returns and even good profitability for the
franchisee and a very high demand for Tanishq franchisees.
• There has been a revision in franchisee terms. The old structure was 15 years old and there were several developments
in these past years. It will have minimal impact on the profitability.
• According to the company's dividend policy, they will maintain a dividend payout between 25%-40% and this year
dividend of 26.6% was declared.

Additional details:
• New Customers contribute to about 50% to the overall chain and the rest 50% is repeat customers.
• The wedding jewellery is about 19% of the total jewellery business as compared to 20% previous year.
• Importing CEPA gold gave the company 1% custom duty benefit and therefore they imported several tonnes of it and
therefore more bullion sales.
• The international business is very well, and the company is planning to expand from 7 stores to 25 stores by the end of
FY24
• Double digit growth was seen in the enrollments when it comes to Golden Harvest Scheme.

Management Guidance:
• The management is looking forward to sustain its current EBIT margins in the jewellery segment.
• The management has invested for growth and will continue to do so in the coming years.
• Higher interest costs and tougher financial conditions will impact.
3
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Quarterly Trends
Exhibit 4: Revenue grew up 33% YoY Exhibit 5: EBITDA grew 37% & Margins 34bps YoY
(Rs. Cr)
12000 EBITDA EBITDA (%)
(Rs. Cr)

10000 1400 14.0%

1200 13.0%
8000
1000 12.0%
6000
800 11.0%

4000 600 10.0%

Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23

Source: Company Reports Source: Company Reports

Exhibit 6: PAT grew 40% & Margins 34bps YoY Exhibit 7: 532 New Stores Opened YoY
(Rs. Cr)
PAT PAT (%) 2800

1000 10.0%
2600
800 9.0%
8.0% 2400
600
7.0%
400
6.0% 2200
200 5.0%
0 4.0% 2000
Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23

Source: Company Reports Source: Company Reports

Exhibit 8: EV/EBITDA shrunk 26% & Revenue 38% Exhibit 9: EPS (in Rs) grew up 43% YoY
12
EV/EBITDA EV/Revenue

70x 10x 10
65x 9x
8x 8
60x
7x
55x
6x 6
50x 5x
45x 4x
4
Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23
Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23

Source: Company Reports Source: Company Reports

4
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Exhibit 10: Annual Snapshot :

Particulars (Rs. Cr) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Revenue 10,927 11,913 11,276 13,261 16,120 19,779 21,052 21,644 28,799 40,575
COGS 8,214 8,974 8,409 9,679 11,812 14,588 15,430 17,294 21,825 30,580
Gross Profit 2,713 2,939 2,867 3,582 4,308 5,191 5,622 4,350 6,974 9,995
Gross Margin (%) 24.8% 24.7% 25.4% 27.0% 26.7% 26.2% 26.7% 20.1% 24.2% 24.6%
Staff Cost 540 632 696 787 885 1,019 1,199 1,065 1,349 1,647
Depreciation 68 90 98 111 131 163 348 375 399 441
Other Op Expense 1,128 1,158 1,261 1,640 1,778 2,182 1,956 1,562 2,288 3,504
Operating Income 977 1,059 811 1,044 1,514 1,828 2,119 1,348 2,938 4,403
OPM (%) 8.9% 8.9% 7.2% 7.9% 9.4% 9.2% 10.1% 6.2% 10.2% 10.9%
Interest 87 81 42 38 53 53 166 203 218 300
Other Income 120 71 100 72 89 185 153 187 238 343
Exceptional Items 0 0 0 (103) (17) 0 0 0 (54) 0
PBT 1,010 1,049 868 975 1,533 1,960 2,106 1,332 2,904 4,446
Tax 275 233 192 276 428 568 609 353 706 1,173
PAT 735 816 675 711 1,130 1,404 1,501 973 2,173 3,250
Source: Tijori Finance, The Valuation School Research

Exhibit 11: Supplemental Metrics :

Particulars (Rs. Cr) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
EBITDA 1,045 1,149 909 1,155 1,645 1,991 2,467 1,723 3,337 4,844
EBDT 958 1,068 867 1,117 1,592 1,938 2,301 1,520 3,119 4,544
EBIT 977 1,059 811 1,044 1,514 1,828 2,119 1,348 2,938 4,403
Basic EPS 8 9 8 8 13 16 17 11 24 37
Net Profit Margin 6.7% 6.8% 6.0% 5.4% 7.0% 7.1% 7.1% 4.5% 7.5% 8.0%
Dividend Per Share 2.1 2.3 2.2 2.6 3.8 5.0 4.0 4.0 7.5 10.0
Effective Tax Rate (%) 27.2% 22.2% 22.1% 28.3% 27.9% 29.0% 28.9% 26.5% 24.3% 26.4%
Source: Company Reports, The Valuation School Research

Exhibit 12: Key Ratios Movement :

Particulars FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
EV/LTM Total Revenue 2.13 2.91 2.67 3.26 5.41 5.36 4.23 6.90 8.27 5.99
EV/LTM EBITDA 19.87 28.34 29.55 33.37 46.46 46.90 33.10 75.55 65.26 48.00
EV/LTM EBIT 21 31 33 37 50 51 39 97 74 53
P/E (Trailing 12m) 31.44 42.28 43.12 53.76 71.86 73.48 54.77 158.00 104.00 67.16
Dividend Yield (%) 0.80 0.59 0.65 0.56 0.40 0.44 0.43 0.26 0.30 0.40
P/BV 9.23 11.26 8.51 9.50 16.09 16.34 12.17 18.35 24.08 18.66
Source: Tijori Finance, Moneycontrol

5
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Exhibit 13: Segment Wise Revenue (Standalone):

Particulars (Rs. Cr) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Jewellery 8,632 9,421 8,723 10,485 13,036 16,030 16,738 18,631 24,313 34,105
Watches 1,791 1,912 1,974 2,053 2,126 2,441 2,616 1,580 2,309 3,296
Eyewear 0 332 374 414 415 511 544 375 517 689
Others 500 232 55 65 95 133 171 98 295 154
Corporate (Unallocated) 113 0 52 46 70 133 87 99 184 163
Total Revenue 11,036 11,897 11,178 13,063 15,742 19,248 20,156 20,783 27,618 38,407
Source: Company Reports

Exhibit 14: Segment Wise Revenue & Total Revenue for 10 Years (Standalone)

Jewellery Watches Eyecare Others Corporate (Unallocated) Total Revenue

35,000
39,000
30,000
34,000
25,000
29,000
20,000
24,000
15,000 19,000
10,000 14,000
5,000 9,000
0 4,000
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Source: Company Reports

Exhibit 15: Brands owned by Titan Company

Source: Company Reports, Google images

6
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Exhibit 16: Net Income vs Capital Employed

(Rs. Cr) Net Income Capital Employed

25,000
20,000
15,000
10,000
5,000
0
41729 42094 42460 42825 43190 43555 43921 44286 44651 45016
Source: Screener.in

Exhibit 17: Interest Coverage Ratio (in times) Exhibit 18: ROCE vs ROE
ROCE (%) ROE (%)
40.00x
30.0%
30.00x 26.0%
22.0%
20.00x
18.0%
10.00x
14.0%
0.00x 10.0%
FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23

Source: Screener.in Source: Screener.in

Exhibit 19: Revenue Mix for FY23 Exhibit 20: Operating vs Financial Leverage

Operating Leverage Financial Leverage

6.00

2.00

-2.00 FY19 FY20 FY21 FY22 FY23

-6.00

-10.00

-14.00

Source: Screener.in Source: Screener.in

7
Asia Pacific Research - July 21, 2023

Titan Company Ltd

Key Growth Drivers for Titan Company Ltd:

Leadership position in major business segments:
• Titan is the market leader in the organized jewellery retailing and watches segments, driven by its strong brands,
healthy store additions, association of trust with the Tata brand, and a pan-India distribution network
• Tanishq opened its first international boutique store in New Jersey (USA) in December 2022 which clearly indicates
the company’s plans to expand its presence in the international markets.

Healthy operating efficiency and strong fundamentals:

• The healthy operating efficiency stems from strong control over operations, outsourcing of jewellery-making to
karigar parks, in-house design and expertise in manufacturing processes of watches, efficient working capital
management, and prudent hedging policies.
• Titan had ample liquidity in the form of cash and investments of nearly Rs 3,500 crore as on March 31, 2023, and
unutilized fund- and non-fund-based bank lines of over Rs 8,000 crore as of April 2023.
• The company has no long-term debt on its balance sheet and relies mainly on gold on loan facilities for funding needs.

Eyewear market has immense opportunities to offer:

• According to some reports, eyewear market is USD5bn and should grow at 8.9% CAGR over FY22-27
• India has seen rising penetration of smartphones (54%), and events like COVID 19 has increased the screen time and
therefore offering a lot of scope for Eyewear markets.
• The Eyewear business has seen high growth in the past couple of years and achieved an EBIT of Rs980mn in FY23.

Expansion across geographies:

• International business is performing well.
• Currently, there are six stores in the UAE and one in the US.
• The company plans to expand to 25 stores in FY24 with many stores in the GCC region.

Key Risks faced by Titan Company Ltd:

Direct exposure to volatility in Gold prices:
• Since, maximum sales of Titan are driven by the jewellery segment, there it is directly exposed to the volatility in the
prices of gold.
• This indirectly means that to some extent it is dependent on the economic scenario of the country too since it is also
one of the factors affecting gold prices.

Exposure to regulatory risks in the jewellery division:

• The jewellery sector had seen heightened regulatory action in the past and Titan is directly exposed to this risk.
• Some of these regulatory changes had moderated operating performance in the past.

Intense competition in the jewellery segment:

• Jewellery retailing in India is largely dominated by unorganized players, which have a stronghold in their regions.
• Besides, organized players have also been expanding rapidly in select regions, posing stiff competition.
• Therefore, increasing the number of stores for expansion is the only way to mitigate the risk.

Data security leakage from third party agencies:

• As the Company uses third party agencies for carrying out various business-related activities, there could be a
probability of loss of business sensitive data and sensitive customer data managed by third parties.

8
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Peer Comparison

Exhibit 21: Peer Stock Performance

Peer Stock Performance (1Y) - Indexed

Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23

Titan Kalyan Jewellers Vaibhav Global PC Jewellers Ethos Ltd

Source: Yahoo Finance

Exhibit 22: Peer Financial Comparison

Name CMP P/E Mkt Cap PEG Debt CFO/ EBITDA Int Coverage EBITDA(%) ROE ROCE
Titan Company 2,979 81 2,64,534 3 9,367 (0.20) 15.83 12.03% 30.75% 25.13%
Kalyan Jewellers 173 39 17,799 1 4,295 0.30 2.71 8.28% 13.46% 12.69%
Vaibhav Global 342 54 5,644 (45) 193 0.29 18.23 7.42% 9.02% 11.13%
PC Jeweller 30 (7) 1,402 NA 3,736 18.90 0.78 10.03% -5.36% 5.22%
Ethos Ltd 1,491 58 3,484 1 121 0.20 6.64 14.36% 13.86% 16.40%
Source: Screener.in

9
 Asia Pacific Research - July 21, 2023

Titan Company Ltd

Analyst Coverage Universe

Exhibit 23: Analyst Coverage Universe

Sr No Date Research House Rating Price at Reco Target
1 12 July 2023 Prabhudas Lilladhar Accumulate 3,097 3,242
2 07 June 2023 Chola Wealth Direct Buy 2,907 3,350
3 09 May 2023 Geojit BNP Paribas Hold 2,748 2,960
4 05 May 2023 ICICI Direct Buy 2,733 3,240
5 04 May 2023 HDFC Securities Sell 2,670 2,400
6 04 May 2023 ICICI Securities Limited Buy 2,670 2,800
7 03 May 2023 Prabhudas Lilladhar Buy 2,654 2,992
8 03 May 2023 Motilal Oswal Buy 2,654 3,080
9 16 March 2023 Bonanza Buy 2,399 2,875
10 09 March 2023 ICICI Securities Limited Accumulate 2,368 2,600
11 03 February 2023 HDFC Securities Sell 2,463 2,150
12 03 February 2023 ICICI Direct Buy 2,463 3,030
13 03 February 2023 ICICI Securities Limited Accumulate 2,308 2,600
15 02 February 2023 Prabhudas Lilladhar Buy 2,308 2,905
16 02 February 2023 Motilal Oswal Buy 2,308 3,070
17 10 January 2023 ICICI Securities Limited Accumulate 2,485 2,800
18 09 January 2023 Prabhudas Lilladhar Accumulate 2,485 2,875
19 16 December 2022 Motilal Oswal Buy 2,483 2,910
20 10 November 2022 Geojit BNP Paribas Hold 2,652 2,940
Source: Trendlyne

Disclaimer: This is an academic project and is not meant for commercial usage.

This information/document does not constitute an offer to sell or solicitation for the purchase or sale of any financial
instrument or as an official confirmation of any transaction. The information contained herein is obtained from publicly
available data or other sources believed to be reliable and the Author has not independently verified the accuracy and
completeness of the said data and hence it should not be relied upon as such.
Author is not SEBI registered investment analyst. This document is prepared as part of academic project.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. The
securities quoted are for illustration only and are not recommendatory. Registration granted by SEBI, and certification from
NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

10