The company issued its 3QFY20 trading update where sales growth for the jewelry segment was in line with estimates but for watches and eye wear, it was below expectations. All segments saw slower growth in December partly due to the impact of protests in many parts of the country especially, northeast India which led to store closures. Key takeaways were:

• Jewelry reported sales growth of 11% YoY (retail level 15% YoY) which was in line with management guidance of 11-13% for 2H. The segment continues to gain market share and reported healthy growth in the wedding segment due to the relatively inelastic demand.

• Titan to miss jewellery store addition target for FY20 by a wide margin: Titan had planned to add 71 new stores in the jewellery business in FY20, which would have been a big acceleration over the 34 new stores added in FY19. However the company stated that they now estimate that only 50 stores will be added in FY20, citing operational delays as the key reason.

• Recent spike in gold price could again temporarily postpone consumer demand: Gold prices have seen a sharp jump of ~6% in INR terms in the past 15 days. Like we saw in June 2019, there is a possibility that this kind of a spike leads to consumers postponing buying decisions which could impact 4QFY20.

Valuation and view: While Titan is a good medium term structural play, the stock is expensive at current levels with no near-term catalysts for earnings upgrades.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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