Titan shares may rise up to 20%, say analysts citing strong jewellery segment growth prospects

Titan's goal of opening 25 stores by the end of the year remains on track, according to HSBC. The brokerage's 'buy' recommendation is underpinned by the thriving jewellery business and a promising growth outlook.

Goldman Sachs, while acknowledging the sustained momentum in jewellery sales, noted that October exhibited softness in performance due to the timing of an inauspicious period. However, the brokerage underscored that robust jewellery margins have effectively addressed concerns related to intense competitive pressures.

Moreover, recent store openings by competitors have not significantly impacted Titan's sales. Goldman Sachs also emphasised that, at this stage, the decline in diamond prices does not exert a substantial influence on the business.

Meanwhile, Titan's Chief Financial Officer, Ashok Kumar Sonthalia, in an exclusive interview with CNBC-TV18 said that a significant transformation is underway in the US diamond market. He revealed that 40-50% of centre stones in the US market are now being replaced by lab-grown diamonds.

Notably, Sonthalia's firm has a minority stake in a lab-grown diamonds company based in the US, and he expressed his intention to closely monitor developments within the lab-grown diamonds industry.

In parallel, Goldman Sachs (GS) has revised its earnings per share (EPS) estimates upward by 1-2% to account for the anticipated enhanced growth and improved margins within the jewellery business. Additionally, Switzerland-based brokerage UBS has elevated its EPS estimates for the fiscal years 2024 to 2026 by 3-4%, factoring in the expectation of heightened revenue growth in the near term and improved margins in the previous quarter.

Brokerages maintain their optimism based on the solid foundation of double-digit growth observed across key segments, as well as the notable expansion in both the number of buyers and ticket sizes, contributing to overall sales growth. Furthermore, UBS acknowledged the substantial growth in the wearables sector, with Caratlane reporting an EBIT margin of 4% for the quarter ending in September.

Sonthalia expects Caratlane margins to expand in the next two to three quarters. Caratlane can grow around 48-49% in FY24, he said.

While brokerages have emphasised the growth potential within the jewellery segment, Sonthalia foresees the possibility of jewellery margins in FY24 reaching a range of 12-13%. Notably, he highlighted that India has surpassed China to become the largest market for wearable units.

Titan is strategically focusing on premiumisation within the analog watches sector, and the company is keen on accelerating the growth of its eyecare business. Lenskart, a key player in the eyewear market, has been outpacing Titan's growth in eyewear due to its appeal to the younger generation and fashion-conscious consumers.

Titan completed raising of Rs 2,500 crore through non-convertible debentures(NCDs) at 7.74%, Sonthalia said, adding that he expects total debt in the December quarter to be around Rs 3,000-3,500 crore.