People are getting more comfortable with shopping online- Titan

Update on the Indian Equity Market:

On Thursday, the Indian equity benchmarks declined the most in six months amid broad-based selling in the market. The Nifty50 ended the day at 17,857, down 1.9%. Among the Nifty50 components, ADANIPORTS (-7.4%), ITC (-5.6%), and ONGC (-4.4%) were the top losers. INDUSINDBK (+2.6%), LT (+1.8%), and ULTRACEMCO (+1.2%) were among the few stocks that ended in the green. Among the sectoral indices, PSU BANK (-5.2%), REALTY (-3.8%), and METAL (-3.4%) led the losers. There were no sectoral gainers.

Mr. Ajoy Chawla, CEO of Titan’s jewelry division highlighted the impact of the pandemic and the way forward in an interview with Business Today on 26^th October 2021:

• Titan’s jewelry division witnessed a strong recovery in demand after the second wave of COVID-19 pandemic across its brands and posted a 78 percent growth year-on-year in 2QFY22.
• Titan’s jewelry arm comprises 4 brands- Zoya, Tanishq, CaratLane, and Mia. Tanishq is their most known brand, with over 350 stores in 200 cities. Zoya is their luxury brand while CaratLane is an omnichannel brand. Mia offers contemporary, workwear jewelry.
• The pandemic impacted their operations. Zoya only had three boutiques, two in Mumbai and one in Delhi. Since Mumbai and Delhi form the bulk of the customer base, the impact was severe during the lockdown. A boutique in Bengaluru was opened just after the first lockdown.
• Zoya bounced back strong, on the back of multiple initiatives, and reported 15% retail growth in FY21 over FY20. The Bengaluru boutique has taken off, and six Zoya galleries have been added in some Tanishq stores in metros. As a result of digital and remote shopping initiatives, the recovery was quick.
• While people are comfortable buying jewelry online, not all of the purchase is online. A part of the journey- shortlisting aspect happens online and then the final part takes place offline. The offline could be at the person’s home or at the store.
• In the case of Tanishq, revenue per pure online transaction has jumped from ₹ 14,000-15,000 to 30,000-35,000. This indicates more customers are willing to buy slightly higher ticket prices purely online without any offline element.
• Zoya’s HNI customer base was pretty scared of the pandemic and did not want to venture to the stores. All engagement had to move online or through personal interactions over a video call. The company is curating experiences for its customers at home, such as serving them a Starbucks coffee or getting a special meal delivered from a Taj hotel in case of special occasions.
• In the case of the combination of online and offline- phygital, the ticket sizes are comparable to what the company gets purely offline.
• With travel restrictions and few celebrations, customers have not spent money on many other things. All that saved money is being spent and the jewelry category is up there in terms of wallet share.
• The company currently has four boutiques and six galleries across seven towns for Zoya. They plan to have two-three more boutiques in FY23. The company plans to have 8-10 boutiques and 15-20 galleries in the next 18-24 months.

Asset Multiplier Comments

• Titan has managed to come out of the pandemic with a strong consolidated position in urban markets due to its unique customer experience-centric approach and brand trust it has garnered throughout the years.
• Titan is one of the foremost adopters of BIS Jewellery Hallmarking. It has managed to increase its market share from the unorganized players who are unable to offer the same level of assurance for purity that is commonly associated with jewelry purchases.
• Segment-wise brands, expansion across geographies, phygital and omnichannel strategies are the drivers for the long-term growth of the company.

Consensus Estimate (Source: market screener and investing.in websites)

• The closing price of Titan was ₹ 2,392/- as of 28-October-21. It traded at 101x/ 79x/ 65x the consensus EPS estimate of ₹ 23.7/ 30.4/ 36.6 for FY22E/ FY23E/FY24E respectively.
• The consensus target price of ₹ 2,072/- implies a PE multiple of 57x on FY24E EPS of ₹ 36.6/-.

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