Titan’s CaratLane could grow faster than other segments, says Amnish Aggarwal of Prabhudas Lilladher
Titan share price hit a 52-week high on Tuesday on news reports that it plans to buy the rest of the stake in CaratLane, but hurdles have emerged on the valuation of the residual stake.
PremiumShares of Titan Co. Ltd hit a new 52-week high of ₹2,893 apiece on Tuesday on the National Stock Exchange. According to an Economic Times article, Titan's buy out of the rest of the stake in CaratLane is facing hurdles. Currently, Titan holds a 72.3% stake in CaratLane. Differences have emerged between the Tata Group and CaratLane founders over the valuation of the residual stake.
Mint spoke to Amnish Aggarwal, head of research at Prabhudas Lilladher. Here are the excerpts from the conversation:
1) Titan’s plan to buy CaratLane has hit a valuation hurdle. In this backdrop, how crucial is acquiring CaratLane fully for Titan?
CaratLane is a good brand under Titan, it has scaled up quite well and is now reasonably profitable as well. From the view point of having multiple brands under one roof catering to different segments and sub-segments, it would be helpful/positive if they are able to acquire the full stake in CaratLane.
2) What does CaratLane bring to the table?
CaratLane’s earnings before interest and tax (Ebit) has jumped from Rs59 crore in FY22 to Rs167 crore in FY23. Plus, the retail area has more than doubled. In FY23, CaratLane’s revenues have grown faster (73% year-on-year growth) than Titan’s standalone jewellery revenue growth excluding bullion sales (37% year-on-year growth).
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3) Do you think that CaratLane’s growth prospects are brighter going ahead and why?
CaratLane is catering to studded daily wear jewellery of 14 carats, 16 carats. It is finding a lot of resonance with young customers. Given the fact that its FY23 topline is just about Rs2200 crore, there is a probability that CaratLane would grow much faster than Titan’s standalone business or Tanishq business. Titan is moving towards becoming a lifestyle brand and CaratLane has enabled them to enter the online segment. Offline also, it is catering to a distinct set of customers, which is a positive for Titan.
4) Titan’s shares have risen by 30% in the past one year and the stock trades at about 66 times FY24 estimated earnings, showed Bloomberg data. What are the triggers for the stock hereon and what do you make of the valuations? Do you think is the impact of higher gold prices on demand?
In the near-term, higher gold prices depress demand, but in the longer-term, it gives confidence to people to buy more. To that extent, Titan continues to look good even from the current levels. Overall, we have a positive view on the Titan stock and do not see a company specific risk as of now.
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