Titan Company Limited: Increased gold prices impacted consumer demand for jewellery

Dated: 9th July 2019

Titan has published its press release giving an update for the 1QFY20 sales performance of the company:

Key highlights are as follows:
1) 1QFY20 witnessed a tough macro- environment with consumption being hit.
2) Jewellery Segment: Titan reported lower than expected revenue growth in this quarter. The management expected growth of 20% YoY for FY20 and the actual growth is ~13% in 1QFY20. This was driven by a sharp increase in gold prices that dented consumer demand significantly in the month of June. Wedding jewellery & studded group witnessed decent growth in the quarter. Sales on the auspicious occasion of ‘Akshaya Tritiya’ were robust.
Tanishq launched Swayahm collection of both plain and studded Jewellery. Mia launched ‘Birthstone Pendant’, ‘Facets’ and ‘Florets’ collections, which have all got a good response according to the Company.
3) Watches Segment: The segment grew 19% YoY in 1QFY20, partly led by the execution of a large institutional order from Tata Consultancy Services (TCS). The tech-enabled wearable has been the new driver for the division. In channels, E-Commerce, Trade and LFS (Large Format Stores) channel remain the growth drivers for Watches division for June quarter. Under the ‘Titan Raga’ brand for women, ‘Raga Cocktails’ collection with Swarovski crystals was launched at the premium end and ‘Raga Viva III’ at affordable prices. ‘Light Leathers — II’ collection, contemporary classic wear watches for men and ‘Purple PoP’ collection for the fun-loving millennial was also launched during the quarter. Fastrack has the exclusive rights in India to produce watches inspired by Game of Thrones and has launched the ‘Game of Thrones’ collection.

4) Eyewear Segment: The division witnessed revenue growth of 13%, aided by the activation i.e., a greater number of buyers enrolling for memberships, schemes/ offers, loyalty programmes, etc during the quarter. Trade channel grew faster than the overall division growth. The division added 27 stores during the quarter and also closed 9 stores ending up with a net increase of about 12,000 sq. feet of retail space. Fastrack Sunglasses launched a lightweight collection called ‘Floatables’.

Consensus estimates (Source: Marketscreener website):
Titan with a closing price, (as on 09-07-2019) of Rs 1,096/- per share trades at a P.E of 51.5x/ 42.3x/ 35.0x its earnings per share estimates of Rs 21.3/ 25.9/ 31.3 for FY20E/ FY21E/ FY22E. The consensus price target is at Rs 1,256/- over the next 12 months.