Author - Assetmultiplier

Dated: 7th August 2019

Quarterly Performance:

Key Highlights:

1. Net sales for the quarter were Rs 52,082 mn, a growth of 16% YoY. The Jewelry/ Watches/ Eyewear business revenues grew 14%/ 20%/ 13% YoY respectively. Other which includes SKINN (skincare) & Taneira (sarees) grew 53% YoY.
2. EBITDA stood at Rs 5,734 mn, a growth of 18% YoY. EBITDA margins were 11.1% vs 10.8% in 1QFY19.
3. As an impact of Ind AS- 116, Titan reported an increase in the depreciation and interest of 86% and 211% YoY respectively.
4. The impact of Ind AS- 116 in the P&L for Titan for the quarter was an increase in interest cost and depreciation by Rs 200 mn and Rs 330 mn respectively and a reduction in rent by Rs 490 mn, resulting in EBITDA going up by Rs 510 mn and PBT lower by Rs 20 mn.
5. The net profit was Rs 3,662 mn, an increase of 10% YoY. Tax rate stood at 29%.

Management Commentary:

1. Management has cut its 22% growth guidance for the jewellery business. They expect the demand for the jewellery to be impacted in 2QFY20 as well due to the rising gold prices. They expect some revival in the demand for the jewellery by September this year.
2. Management expects a recovery in demand with stabilisation of the gold prices.
3. Management highlighted wedding jewellery sales have been lower than their expectations due to a smaller number of wedding days in 1st half of wedding season.
4. The performance from the South region was good whereas West and East India continue to remain most impacted post spike in the gold price
5. They expect a 20% plus growth in the jewellery business in the 2HFY20E.
6. They have maintained the SSS (same-store sales) growth guidance of 14-15% YoY.
7. The watch business has shown a 20% YoY growth in this quarter on the back of the institutional order from TCS of Rs 560 m. Adjusted for this, watch business revenue grew 11% YoY.
8. There was a one-off expense of Rs 400 mn for the Business Associate Meet which impacted the EBIT margins according to the management. This is a non- recurring expense.
9. Management expects an improvement in the margins with revenue growth coming in accompanied by the increased demand in the market.

Consensus Estimate (Source: market screener website)

• The closing price of Titan is Rs 1,036/- on 07-Aug-19. It traded at 52x / 42x/ 35x the consensus EPS for FY 20E / FY 21E/ FY22E EPS of Rs 19.9 / 24.5/ 29.3 respectively.
• Consensus target price of Rs 1,204/- implies a PE of 49x on FY21E EPS of Rs 24.5.

Dated: 6th August 2019

1QFY20 result update:

• Consolidated Revenue grew 2% YoY (-% QoQ) to Rs 5,506 mn. API, Synthesis, Ingredients and FD segments contributed to 67%,11%,3% and 19% of revenues  respectively.
• EBITDA declined 3% YoY (+27% QoQ) to Rs 832 mn. Reported EBITDA margins contracted by 80 bps YoY to 15.1% from 15.9% in 1QFY19.
• Net Profit fell 9% YoY to Rs 151 mn

Management Commentary:

• Due to delay in shipment, revenues of Rs 750-100 mn are pushed to 2QFY20.
• Laurus has incurred capex of Rs 450 mn in 1QFY20 and has guided for Rs 1,500-2000 mn capex in FY20.
• Laurus is very positive about finished dosage business and expects revenues to reach to Rs 4,200 mn for FY20.
• Company expects ~10% growth in API business for FY20. Company expects ARV revenues to be in the range if Rs 1,300-1,400 mn in FY20
• Laurus has completed backward integration and supply issues from China have been mitigated. This has led to an improvement in the gross margin.

Consensus Estimate (Source: marketscreener website)

• The closing price of Laurus is Rs 317/- as on 6^th August 2019. It traded at 18x / 12x the consensus EPS for FY 20E / FY 21E of Rs 17.2 / 26.7 respectively.
• Consensus target price of Rs 435/- implies a PE of 16x on FY21E EPS of Rs 26.7.

Dated: 24th July 2019

Result:

• Reported NII grew 17% YoY (+7% QoQ) for 1QFY20 to Rs 1,479 mn. Reported NIMs were at 3.18% showing an increase of 40 bps QoQ.
• In 1QFY20, PPOP grew by 15% YoY (+12% QoQ) to Rs 1,316 mn. Reported PAT grew 8% YoY (+21% QoQ) at Rs 810 mn.
• Loan book grew 17% YoY on the back of disbursements growth of 10% YoY.
• Asset quality deteriorated sequentially in 1QFY20. GNPAs and NNPAs were at 0.73% and 0.52% respectively in 1QFY20 compared to 0.62% and 0.43% respectively in 4QFY19.

Management commentary:

• The company expects to bring NPAs down to March 19 levels by 2QFY20.
• During the quarter, the company made NPA provisions of Rs 67.5 mn and standard asset provisions of Rs 19.1 mn.
• In Karnataka, AUM growth was 7%, while ex-Karnataka AUM growth was 22%. Overall, southern region grew 15% and non-south regions reported 20% growth.
• Growth in Metro cities is ~11% while non-metro growth is ~30%.
• The company expects to benefit from the new affordable housing projects coming up on the outskirts of Bangalore. Can Fin will be focusing on tier 2-3 cities.
• Management is hopeful of achieving loan book of Rs 23,000 mn by end of FY20

Consensus Estimate (Source: Market screener website)

• The stock price was Rs 390/- as of close price of 24^th July 2019 and traded at 2.5x/ 2.1x the consensus book value for FY20E / 21E of Rs 158 / 186 respectively. 
• Consensus target price is Rs 431/- implying P/B of 2.3x for FY21E book value of Rs 186.

Note:

NII- Net interest income

NIM- Net interest margins

PPOP- Pre-provision profits

NPA- Non-performing assets

AUM- Assets under management

Dated: 21st July 2019

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Source: www.masterinvest.com

Dated: 10th July 2019

Tata Consultancy Services Limited: Softer 1Q, Company still eyeing for double-digit sales growth in FY20

1QFY20 Results
• TCS revenues in Rs terms reported 9% YoY growth to Rs 3,81,720 mn and to Rs 5,484 mn in $ terms. BFSI grew 11% YoY and Digital revenue reported strong growth of 44% YoY.
• Reported EBIT grew 7% YoY to Rs 92,200 mn. EBIT margins declined by 80 bps YoY to 24.2% due to higher depreciation and other expenses. 
• Reported PAT grew 11% YoY to Rs 81,530 mn.

Management Commentary
• TCS remains confident about medium-to-long term demand.
• Double-digit revenue growth in FY20 will depend on how 2Q pans out. 
• From now on, the focus will remain on maintaining margins. That will remain priority rather than margin expansion.
• Volatility in currency shall remain a factor to keep track of. 
• Sub-contracting costs have been on an upward trajectory for some time. This is a reflection of TCS’ decision to participate aggressively and capturing Digital demand, despite the supply situation.
• Issued joining letters to 30k+ in 1Q. 40% have on-boarded in 1Q and the remainder in 2Q.

Consensus Estimate (Source: www.marketscreener.com) 
• The stock price is Rs 2,105/- as of close price of 10th July 2019 and trades at 23x / 21x the consensus EPS for FY 20E / 21E EPS of Rs 90.1 / 101.0 respectively. 
• Consensus target price is Rs 2,165/- valued at 21x FY21E EPS of Rs 101.0.

Dated: 9th July 2019

Titan has published its press release giving an update for the 1QFY20 sales performance of the company:

Key highlights are as follows:
1) 1QFY20 witnessed a tough macro- environment with consumption being hit.
2) Jewellery Segment: Titan reported lower than expected revenue growth in this quarter. The management expected growth of 20% YoY for FY20 and the actual growth is ~13% in 1QFY20. This was driven by a sharp increase in gold prices that dented consumer demand significantly in the month of June. Wedding jewellery & studded group witnessed decent growth in the quarter. Sales on the auspicious occasion of ‘Akshaya Tritiya’ were robust.
Tanishq launched Swayahm collection of both plain and studded Jewellery. Mia launched ‘Birthstone Pendant’, ‘Facets’ and ‘Florets’ collections, which have all got a good response according to the Company.
3) Watches Segment: The segment grew 19% YoY in 1QFY20, partly led by the execution of a large institutional order from Tata Consultancy Services (TCS). The tech-enabled wearable has been the new driver for the division. In channels, E-Commerce, Trade and LFS (Large Format Stores) channel remain the growth drivers for Watches division for June quarter. Under the ‘Titan Raga’ brand for women, ‘Raga Cocktails’ collection with Swarovski crystals was launched at the premium end and ‘Raga Viva III’ at affordable prices. ‘Light Leathers — II’ collection, contemporary classic wear watches for men and ‘Purple PoP’ collection for the fun-loving millennial was also launched during the quarter. Fastrack has the exclusive rights in India to produce watches inspired by Game of Thrones and has launched the ‘Game of Thrones’ collection.

4) Eyewear Segment: The division witnessed revenue growth of 13%, aided by the activation i.e., a greater number of buyers enrolling for memberships, schemes/ offers, loyalty programmes, etc during the quarter. Trade channel grew faster than the overall division growth. The division added 27 stores during the quarter and also closed 9 stores ending up with a net increase of about 12,000 sq. feet of retail space. Fastrack Sunglasses launched a lightweight collection called ‘Floatables’.

Consensus estimates (Source: Marketscreener website):
Titan with a closing price, (as on 09-07-2019) of Rs 1,096/- per share trades at a P.E of 51.5x/ 42.3x/ 35.0x its earnings per share estimates of Rs 21.3/ 25.9/ 31.3 for FY20E/ FY21E/ FY22E. The consensus price target is at Rs 1,256/- over the next 12 months.

Dated: 2nd August 2019

1QFY20 result update:

• Consolidated revenue grew 31% YoY (-3% QoQ) to Rs 5,953 mn. API, PFI and FD segments contributed to 36%,16% and 48% of revenues respectively.
• EBITDA grew 63% YoY (+22% QoQ) to Rs 1,186 mn. Reported EBITDA margins expanded by 390 bps YoY to 19.9% from 16.0% in 1QFY19.
• Net Profit without JV grew 55% to Rs 578 mn and net profit with the share of JV grew 61% YoY to Rs 832 mn.

Management Commentary:

• Management has reiterated 20% CAGR growth in revenues and 25% CAGR growth in profits for the next 3 years.
• Management has said that raw material costs risks have been mitigated so going forward raw material costs will be stable.
• Good growth in FD sales and increased utilization of few idle capacities has led to an improvement in gross margins
• Management has guided for ~19% EBITDA margins for FY20E.
• Granules have guided for 8-12 filings and 3-5 approvals in FY20E.
• Capex guidance for FY20E remains constant Rs 1500 mn.
• Management has mentioned that they will be reducing promoter pledging which is 43% as of now to 33% in a few days and will be fully removed by FY21E.

Consensus Estimate (Source: market screener website)

• The closing price of Granules is Rs 92/- as on 2^nd August 2019. It traded at 8x / 7x the consensus EPS for FY 20E / FY 21E of Rs 11.6 / 13.6 respectively.
• Consensus target price of Rs 142/- implies a PE of 10x on FY21E EPS of Rs 13.8.