Star of Titan sparkles and investors shine

Titan Co. Ltd’s December Quarter Update (T3FY22) brings joy and sets the tone for strong financial results. The jewelry retailer continued its strong growth momentum in the third quarter, with overall revenue up 36% year-on-year (year-on-year).

The flagship jewelry business, which represented more than 85% of sales for the half-year ended in September, continues to shine. Excluding bullion sales, jewelry revenue grew 37% year-on-year on a decent basis last year. Analysts believe a solid volume performance in the last quarter. No wonder, Titan’s latest update prompted many analysts to raise their earnings estimates. For example, Prabhudas Lilladher Pvt. Ltd increased its earnings per share estimate for fiscal year 22/23/24 by 10%, 5.8% and 6.5% to reach ??25.6, ??33.4, and ??42.2, respectively.

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Sparkling show (Mint)

Strong demand for jewelry this time around was led by holiday sales in October and November, according to Titan. Overall, ticket sizes were around 15% larger than pre-pandemic levels.

Titan’s second main business is watchmaking, whose revenues increased by 28%, helped in part by a softer base. In Q3FY21, the watch segment recorded a decrease of 12%.

Overall, the strong revenue trend should help improve margins. “A slight improvement in stud mix and operating leverage should lead to an improvement of around 150 basis points in its Ebitda margins to 13.2%,” analysts at Emkay Global Financial Services Ltd. said. EBITDA is earnings before interest, taxes, depreciation and amortization. The basis point is 0.01%. The EBITDA margin at T2FY22 and T3FY21 was 13.3% and 11.8%, respectively.

Many analysts are optimistic about Titan’s growth prospects. Nonetheless, the restrictions given the new wave of covid-19 cases are worth following. “Going forward, we expect the Jewelry division to continue to perform well, with stable gold prices. However, the threat of further lockdowns given the increase in covid-19 cases remains a key area to watch, ”analysts from Dolat Capital Market Pvt said. Ltd. As such, management’s comments on demand trends when announcing the third quarter results would be key for investors.

Titan shares hit a new 52-week high on NSE on Friday, although they closed nearly 1% lower. The title performed exceptionally well.

Over the past year, Titan shares have appreciated by around 65% compared to the gain in the Nifty50 index of around 25%. Of course, stock valuations are more expensive now. Based on Bloomberg data, Titan shares are now trading at 82 times estimated earnings for FY2023. The stock’s exceptional returns and costly valuations may well prevent significant rises in the near future.

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