Shares of Titan Co. Ltd touched a 52-week high during trading hours on Wednesday, also the occasion of Akshaya Tritya, considered auspicious for gold purchases. The stock’s pricey though. Valuations at 59 times estimated earnings for this fiscal year (FY19) continue to be stretched. But investors aren’t losing sleep over it.

Titan, which derives a lion’s share of its overall revenues from jewellery sales, is in a sweet spot. After the Nirav Modi-Gitanjali Gems scam came to light, it is natural that consumers would seek brands that they think are trustworthy. In that backdrop, Titan being from the house of Tatas offers comfort.

In its quarterly update earlier this month, the company had said, “Regulatory developments like GST (goods and services tax) implementation, continuous drive against unaccounted wealth and the more recent developments related to the credit situation of the jewellers, will pose serious challenges for the jewellery industry in India."

Titan also acknowledged that the same situations will prove to be tailwinds for organized corporate jewellers like itself with strong balance sheets.

Market share gains as a result of the above developments are expected to benefit the company. Last week, Titan said it intends to clock Rs40,000 crore worth of revenue in the jewellery business based on the maximum retail price by FY23 with about 10% market share of the industry. Currently, the company’s market share is at about 5%. But whether its market share will double in the next five years is a key question.

According to analysts from JM Financial Institutional Securities Ltd, this maths, however, would peg the size of the total jewellery market in the country at $61-62 billion in FY23 (estimated) versus approximately $37 billion at present and implies an intrinsic growth of 8-9% per annum over each of the next five years for the total market.

“We note, however, that while the total gold demand in the country did grow at about 11% CAGR over the last 10 years in value terms, the industry actually shrunk in size in the last 5 years (value-terms)," wrote the analysts in a report on 13 April. CAGR is compound annual growth rate.

Titan has also extended its 2.5 times jewellery revenue target by a year to FY18-FY23. The earlier guidance was for FY17-FY22. Simply put, the company plans to grow jewellery revenues at a CAGR of 20% for the next five years. Analysts expect the jewellery segment to have increased by 25% in FY18.

For investors, even as the outlook remains favourable from a near-term perspective, how the jewellery market share gains pan out will be the key in the long run.