Emkay Global Financial has given Buy recommendation for Titan Company with a target price of Rs. 2775 in its research report issued on May 04, 2022

Emkay Global Financial’s report on Titan Company

Q4 PAT was ~15% lower than our estimates, largely due to Rs1.2bn expenses related to voluntary retirement/ex-gratia bonus. Adjusted for this, EBITDA margins were in line with our estimates but ~150bps lower than consensus estimates. Overall, Q4 was affected by operating challenges and gold price volatility, leading to flat revenues and weak margins on negative fixed cost leverage. However, TTAN expects a strong Q1, led by uninterrupted wedding/festive sales after two years of lockdowns. In anticipation of a strong season and low base, working capital has more than doubled to ~Rs62bn, leading to a negative FCF of ~Rs10bn in FY22. But, we expect it to normalize in FY23E. Store additions were robust, leading to ~11% growth in retail space in FY22.

Outlook

We raise estimates by 2-3% on a strong demand environment and aggressive expansion plans. Strong growth visibility and turnaround in Eyewear/Caratlane drive our positive stance. Maintain Buy with a TP of Rs2,775 (Rs2,900 earlier), valuing TTAN at a reduced multiple of 53x due to a 25bps increase in WACC and roll-over to Jun’24E EPS.

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