Titan Company jewellery growth and margin expansion support earnings upgrade

Investment View and Earnings Upgrade

Motilal Oswal Financial Services Ltd. retained its Buy rating on Titan Company after a strong 1QFY27 performance and raised its FY27E and FY28E EPS estimates by 3-4%. The broker views Titan as a bellwether for the organised jewellery market, supported by its sourcing advantages, high studded-jewellery presence, youth-centric positioning, reinvestment strategy and strong Tanishq brand recall.

Motilal Oswal believes these competitive strengths and Titan’s execution record position the company well to benefit from ongoing industry formalisation.

1QFY27 Financial Performance

Titan reported consolidated revenue growth of 29% year-on-year to Rs 21,360 crore in 1QFY27, broadly in line with Motilal Oswal’s estimate. Consolidated EBITDA increased 36% to Rs 2,480 crore, above the broker’s estimate of Rs 2,290 crore. Adjusted PAT grew 35% to Rs 1,470 crore, compared with the estimate of Rs 1,390 crore, while reported PAT rose 63% to Rs 1,780 crore.

Jewellery Demand and Retail Expansion

Domestic jewellery demand was temporarily disrupted in May following the May 10 announcement to postpone jewellery purchases, the May 13 customs-duty changes and wedding-calendar effects. Management said demand recovered from early June, with most deferred demand recouped during June, and did not expect a meaningful carry-forward impact into 2QFY27.

Domestic jewellery brands Tanishq, Mia and Zoya delivered 33% like-for-like growth. Studded-jewellery revenue rose 34%, with the studded share at 27%. Jewellery buyer growth was 5%, while average ticket size increased 31%. CaratLane revenue grew 40%, supported by healthy double-digit buyer growth.

Titan added 35 jewellery stores during the quarter, taking its jewellery store count to 1,261. Its overall store count stood at 3,551 as of June 2026.

Jewellery Margins and One-time Benefits

Reported margins benefited from a one-time Rs 407 crore inventory gain following the increase in customs duty from 6% to 15%. Excluding the Rs 386 crore gain in Tanishq, Mia and Zoya, standalone jewellery EBIT rose 41% year-on-year to Rs 1,860 crore. EBIT margin expanded 20 basis points year-on-year to 11.7%, above Motilal Oswal’s estimate of 10.7%.

The jewellery business also recorded a 75-80 basis point mark-to-market gain from the divergence between international and domestic gold prices. Management expects this benefit to reverse over the next two to three quarters. It indicated a normalised jewellery EBIT margin of around 10.9% and expects margins to remain near 11% over the medium term.

A higher studded mix, lower gold-coin contribution, greater adoption of lower-carat jewellery, sourcing initiatives and gross-margin programmes are expected to support margin expansion in 2HFY27.

Segment Performance

CaratLane’s adjusted EBIT margin expanded 340 basis points year-on-year to 10.1%. Management expects the business to move gradually towards a double-digit margin but continues to prioritise revenue growth rather than maximising margins. International jewellery excluding DAMAS remained profitable at around a 5-6% EBIT margin, while DAMAS incurred a loss as geopolitical conditions reduced footfalls and ticket sizes. Management expects DAMAS profitability to recover when conditions normalise.

Earnings Outlook and Valuation

Motilal Oswal forecasts FY26-FY28E sales, EBITDA and adjusted PAT compound annual growth of 18%, 22% and 25%, respectively. The broker’s target price of Rs 6,000 is based on 60 times September 2028E EPS.

Key Factors Affecting the Thesis

• Jewellery demand recovery following the temporary disruption in May.
• Gold-price stability and the resulting visibility on margins.
• Reversal of the mark-to-market benefit recorded in the jewellery business.
• The pace of recovery in DAMAS as geopolitical conditions normalise.