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Jewellery and watches maker Titan Co. Ltd has made a comeback, but how? Robust recovery in key business segments in the September quarter (Q2FY22) has sent the stock soaring on the exchanges. The stock rose nearly 10% in Thursday’s opening trade and touched a new 52-week high of 2,362 on the National Stock Exchange. With that, the market capitalization of this Tata group stock surpassed the 2 trillion mark.

In its pre-quarterly update for Q2FY22, the company said it has witnessed strong recovery in demand across its consumer businesses after the impact of the second wave of the coronavirus faded, with sales growing swiftly to above or close to pre-pandemic levels in most divisions.

Its key jewellery segment reported 78% year-on-year growth in Q2FY22, excluding bullion sales.

Shining bright 
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Shining bright 

According to Emkay Global Financial Services Ltd analysts, Titan’s Q2 business update highlights a robust recovery and strong performance across divisions, with the jewellery division reporting a two-year CAGR of 32%. CAGR is short for compounded annual growth rate.

Titan said most of its stores are now fully operational, barring a few in select towns facing localized restrictions, with overall store operation days exceeding 90% in the quarter.

Furthermore, the company said apart from its thrust on digital and omnichannels, it has also accelerated its retail network expansion in Q2. In the jewellery segment, Titan added as many as 13 stores in the quarter, taking the total store count to 414.

The Emkay report said network expansion has also accelerated in the quarter.

“Full unlocking and the upcoming festive/wedding season are likely to further boost revenues in the coming quarters and may offer more upside," Emkay said in a 6 October report.

Clearly, the Street has given a thumbs up to the company’s solid pace of recovery. However, investors should note that margins would see some compression in the September quarter given the lower contribution of high margin generating studded jewellery business.

Nonetheless, strong topline growth will still drive sharp Ebitda growth, analysts at Motilal Oswal Financial Services Ltd said in a report. Ebitda is short for earnings before interest, tax, depreciation and amortization.

“Stability in gold prices 47,000 (15% lower than the peak of 55,000-56,000 in August 2020) bodes well for consumer demand in the near term. With upbeat consumer sentiment, festive demand is likely to remain robust," said the report by Motilal Oswal Financial Services.

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