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What is Driving Titan’s Share Price?

08 October 2021
3 minutes

Recently Titan became the second tata-group company to reach the Rs 2 lakh crore market capitalisation, second only to the IT behemoth, Tata Consultancy Services (TCS) which sits at Rs 13 lakh crore market cap. More than 90% of the company’s stores are now operations that bode very well for the upcoming festive season, lower gold prices and pent up consumer demand for gold. 

Reasons for rally

Titan share price was up almost 10% in the past week up to October 8, 2021. And it has gained more than 95% in the last one year and 18% in the past month. 

The company released its quarterly business updates in the first week of October, showing more than 70% growth in a couple of its business segments. 

Jewellery business segment of Titan: Jewellery accounts for at least 85% of Titan’s business. Business in this segment rose 78% as per the latest business update. Titan added around 13 jewellery stories in the second quarter alone which makes the total store count 414 in India. 

Revenue metrics for other business segments

Revenue Metrics            New Store Additions Total  

Stores 

(as of Seo’21l 

Segment I Subsidiary  YoYGrowth%  

(Q2FY22 v/s Q2FY21

Jewellery  78%  13  414 
Watches & Wearables  73%          789 
                        Eye Wear  74%  24          629 
Other Businesses              121%          14 
Titan Company (Standalone)  78%  45        1,846 
Titan Engineering and Automation(TEAL) (43%)  – 
                        Caratlane  95%          123 

Note: Jewellery growth rate excludes bullion sale

Demand for gold jewellery in India has stalled for more than a year. Major events like weddings, gifting or even purchase for personal use was postponed due to the outbreak of Covid-19 in 2020. With the economy slowly re-opening, weddings have also started picking up this year. This along with the upcoming festive season including Diwali and Dhanteras, many analysts are expecting a strong quarter. To combat lockdown pressures the company also launched digital gold that helped customers invest in the yellow metal online where they have the option to convert it into physical jeweller at a later stage.

Impact of gold prices on Titan

Gold prices are on a downtrend in the past few weeks, running into October. Gold futures price on MCX has fallen by more than 2% since August 2021. A media report suggested that in local markets gold prices fell 17%.  India consumes more than 60% of its gold in the form of jewellery, the report said. Fall in gold prices is timely with the upcoming festive season and bodes well for Titan as it is likely to improve its revenue. 

Financials  

Titan’s revenue was up 122% during the June quarter FY22, mainly on account of a low base during the same period last year with most of the country in lockdown. If we include bullion sales of Rs 424 crores, total revenue for the company rose 74% to Rs 3,314 crores.  The jewellery business reported an income of Rs 2,467 crores during the first quarter, around a 108% increase from last year. Watches and wearables business posted almost a four-fold increase to Rs 292 crores. Eyewear business revenue almost doubled to Rs. 67 crores in the quarter. The company has a comfortable debt position, with a debt-to-equity ratio of less than one times.

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