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Titan Set to Capitalize on India's Branded Jewelry Growth

HSBC initiates coverage of Titan with ‘overweight’ rating and a price target of INR 290 per share.
Apr 23, 2012 4:11 AM   By Dilipp S Nag
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RAPAPORT... Growth in demand for branded jewelry in India is set to continue with Titan Industries well ‎positioned to capitalize on that trend, according to HSBC Global Research.‎ The report stated that Titan has the distribution and scale of operations to strengthen ‎its brand position, particularly as the company aims to almost double sales of its flagship ‎Tanishq brand in the next three years by opening large, self-run stores.‎

‎“We estimate that this move away from the asset-light franchise model in the world’s ‎largest gold jewelry market is likely to capture value equal to 11 percent of the current ‎market cap,” said Amit Sachdeva, an analyst at HSBC. “Running its own stores should ‎provide cost benefits, give Titan a bigger cushion to handle prices competition and ‎improve distribution.”‎

The researchers explained branded jewelry accounts for just 7 percent of the total ‎market but is growing rapidly as higher income and growing urbanization in India mean ‎that more people can afford Titan’s premium prices. The first mover advantage, brand ‎strength, scale and distribution give it a strong competitive advantage, HSBC noted.‎

Titan, which operated 786 exclusive retail outlets in 155 towns as of December 31, is ‎India’s largest jewelry retailer with portfolio of brands that includes Tanishq, GoldPlus, ‎Zoya and Mia jewelry.‎

The researchers noted that several regional Indian jewelers, mainly family-owned ‎businesses, are planning to expand which will put pressure on pricing.‎

‎“We think Titan, an urban middle-class consumer play, is well positioned as it offers ‎location and quality design. A move towards diamond-studded jewelry and premium ‎watches is the key to margin expansion, while eyewear and accessories should sustain ‎growth momentum,” HSBC said.‎

HSBC initiated coverage of Titan with an ''overweight'' rating and a price target of INR 290 ‎per share. The stock was trading at INR 238.50 per share in mid-day trade on Monday.‎
Tags: Branded jewelry, diamond, Dilipp S Nag, Goldplus, HSBC, India, Jewelry, Mia, Rapaport, Tanishq, Titan, Titan Industries, Zoya
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