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TP : Rs225
Investment Rationale
§ While Titan reported stellar volume growth performance - 30%+ in its jewellery segment and 18% in the watches
business during 1QFY12, substantial increase in gold and diamond prices have triggered earnings upgrade
during this quarter.
§ We remain cautious on discretionary spends and sustainability of volume growth in discretionary products
considering the overall macro scenario.
§ Hence, we remain vigilant on the company’s growth outlook as the recent upgrades are driven by sharp price
increases in gold and precious stones and not volume growth.
§ We expect volume growth to remain modest in forthcoming quarters – 30% for jewellery and 10% for watches in
FY13E. We remain watchful of incremental risks to volume growth, especially in its jewellery division, in the near
future.
Valuations
§ Current valuations at 26x FY13E earnings do not offer comfort, being 15% higher than 5-year average PER.
Further, there is risk of sharp de-rating of the stock in event of moderation of volume and earnings growth.
§ We, thus, maintain our HOLD rating on the stock with a target price of Rs 225/share
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