This topic contains 1 reply, has 1 voice, and was last updated by Vikas Thakkar, Rajkot 1 year, 1 month ago.
November 12, 2018 at 10:00 am #3449
Titan Ltd. ( Posted on 12 November 2018)
by Paresh Gordhandas, CA, Research Analyst
Buy (TP Rs 895 , CMP Rs 1111)
Coming off a rather painful first Quarter, channel checks suggest that most big-box jewellers grew at 10-15% in the second Quarter. In this back-drop, Titan’s second Quarter performance seems rather commendable as the market share gain is on track, albeit one-offs marred profitability. One-offs include 1. Franchisee takeover costs (Rs. 150 mn),
2. Inventory valuation loss (Rs. 180 mn) and
3. A Rs. 290 mn provision towards IL&FS exposure (Total exposure of Rs. 1.45bn).
Titan’s revenue grew by 27.5% . EBIT/APAT growth at 9%/18.5% respectively to 4.3bn/Rs3.3bn .
Jewellery biz grew by ~29% to Rs 36.4bn largely volume-led (+24% YoY). Even after adjusting for the one-offs; margins remained under pressure in the mainstay jewellery biz. (adj. jewellery EBIT margins: 11.3%, down 100bp YoY).
Watches biz surprised positively & grew 17.5% YoY to Rs 6.78bn as volumes took off (+21% YoY) led by new launches. Expansion in margins was even more pronounced 212bps to 16.4% . While margins should taper off to ~14-15% by exit FY19, the watches biz is clearly treading its recovery path well.
Most tailwinds baked in. However, given the underlying RoCE profile of 16-17%, the want from growth and its longevity leaves little on the table for investors at current valuations. (trading at 39x Sept-20E EPS). I maintain my estimates and DCF-based TP of Rs 820/sh (implying a P/E of 38x Sept-20E EPS).
Detailed Analysis for the quarter
Second quarter seems promising: Jewellery revenue grew 27.5%. Retail channel/SSSG grew 38%/32% YoY respectively. Grammage grew 24% YoY. Jewellery EBIT cracked 195bp to 10.4% . The festive season (3Quarter) has had a good start – 29% YoY growth in retail sales for the first 40 days; reported revenue is estimated to be higher. The Management is confident of a strong 3Q performance.
Non-jewellery treading the recovery path well: As Titan continues to launch new product and fill price point gaps in its non-jewellery portfolio; both watches and eyewear seem to be treading the recovery path well. Eyewear grew at an impressive 19% YoY; Growth was primarily backed by introduction of more assortments at affordable prices. Management intends to step up customer acquisition in eyewear to 3.7mn in.
The chart analysis suggest strong bullish trend for the scrip. RSI is at 66.79.MACD: 14.34, Signal: 6.32,and it indicate positive crossover and strong upward trend.
STOCHRSI %K: 100.00, %D: 37.50
Stop Loss of Rs. 858
Near Term Target Rs. 1111.
Next Analysis will be given on Monday 19 November 2018, Morning
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November 13, 2018 at 10:53 am #13095
Vikas Thakkar, Rajkot
I had purchased 1000 shares of Titan at Rs 37 before few years . Unfortunately most of the shares were sold off at Rs. 200. I considered myself fortunate for the profits which I earned at that time. Now I repent. Yesterday , after studying your analysis, I bought 10 shares and on the first day itself, it gave strong profits. Congrats.