Titan Company Ltd: Retains its growth expectation of 20% YoY for 2HFY20E.

Update on the market:

Market opened weak following the drone attack of the Saudi oil giant ‘Aramco’. This led to a sharp increase in the prices of crude oil which shot up as high as 20%. This is crucial for India as 80% of crude oil requirement is procured through imports and Saudi is responsible for 10% of India’s crude requirement. Nifty closed 72 points lower at 11,003. BPCL, M&M, SBI were among the biggest losers. Titan, Britannia, Tech M were the gainers. Among sectoral indices PSU Bank (-1.4%), Realty (-1.4%), Financial Services (-1.0%), Bank (-1.0%) closed lower while Pharma (0.4%), FMCG (0.4%), Media (0.2%) ended on a positive note.

Titan Company Ltd: Retains its growth expectation of 20% YoY for 2HFY20E.

Key take away from the interview given by the CFO of the Company Mr S Subramaniam

1)      Titan expects a growth of 20% for the 2HFY20E on the back of the improving scenario for the industry.

2)      The CFO said there has been some improvement from August for the overall industry.

3)      Titan has shown a decent performance in the month of August according to him.

4)      Titan has suffered sales wise in the month of June & July led by the sharp increase in the gold prices.

5)      As per him, whenever there are fluctuations in the gold price, people tend to wait and buy when they have no other option but to buy. As the wedding & festival season has started, Titan is seeing people coming back and buying gold.

6)      The Company also expects investors to come back to the asset class with prices going up during this festive season.

7)      On the business front, Titan focus is more on getting the top line and also gaining the market share for which they have been already working.

8)      At the same time, he also mentioned that the second quarter of FY20E will show a decline in sales since July was impacted due to the rising gold price. They expect a 12-13% YoY growth in 2QFY20E for the jewellery business.

9)      Speaking about millennials, the CFO said, “Jewellery is clearly not something which they buy the way their mothers bought. However, having said that, we also see them buying more of products at lower purchase point, more in the nature of accessories.”

Consensus Estimate (Source: market screener website)

·        The closing price of Titan Company Ltd was ₹1,147/- as of 16-September-19. It traded at 58x / 47x / 39x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 19.6 / 24.2 / 29.5 respectively.

·        Consensus target price of Rs 1,170/- implies a PE multiple of 40x on FY22E EPS of ₹ 29.5.