Titan

10 Dec

Demand has been quite decent: Subbu Subramaniam, Chief Financial Officer, Titan Co. Ltd

Update on the Indian Equity Market:

On Monday, NIFTY50 closed -0.13% higher at 11,936. NIFTY50 gainers includes BPCL (+2.2%), Axis Bank (+2.1%) and Adani Ports (+2.0%). NIFTY50 losers includes TCS (-3.0%), HCL tech (-1.6%) and Cipla (-1.3%). Auto (+0.8%), Metal (+0.5%) and Financial Services (+0.4%) were the top gainers and Realty (-1.6), IT (-0.9%), and Media (-0.8%) were the top losing sectors.

Excerpts from an interview with Mr. Subbu Subramaniam, CFO, Titan Co. The interview was published in Livemint dated 05th December 2019.

  • Titan has embarked on Omni channel in five flagship stores in Bengaluru. They are planning to adopt Omni channel across all their divisions. Their websites are done; their e-commerce platforms are quite robust now.
  • The Omni part has just about started; they are starting with the watch division. They have started it with Bengaluru, but this could get rolled out fairly quickly.
  • Even as they start rolling out for the watch division across the country, they may  start in a couple of months in Tanishq, as well in jewelry division.
  • So, Omni is going to be the way they will all do business. People can look at a product anywhere, whether it is online or offline, and choose to take the goods from anywhere. So, that is the strategy, it is more of an enabler.
  • Jewelry margins depend to a large degree on top-line growth, because that is where economies of scale work and the operating leverage kick in. On a gross margin basis, they are generally in the same ballpark as they have been.
  • As they stand right in the middle of the quarter, he restrained from giving any number at this point in time, but EBIT should generally, be in the ballpark of growth – margins that we have been having in the financial year.
  • Demand has been quite decent. November itself has not been bad. Despite Diwali being a little early, demand has been generally fine. Of course, they also had more promotions, which was required under the circumstances. The wedding season has been quite decent.

Consensus Estimate (Source: market screener, Investing.com website)

  • The closing price of Titan Co. was ₹ 1,175/- as of 09-December-19. It trades at 68x/ 49x/ 41x the Consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 18.7/ 23.9/ 29.0 respectively.
  • Consensus target price of ₹ 1,216/- implies a PE multiple of 42x on FY22E EPS of ₹ 29/-

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08 Nov

“Titan’s market share gain story intact”- S. Subramaniam, chief financial officer, Titan Co. Ltd.

Update on the Indian Equity Market:

On Thursday, NIFTY closed 0.42% higher at 12,016. Infratel (+3.5%), Sun pharma (+3.4%) and IndusInd Bank (+2.8%) were the top NIFTY50 gainers. UPL (-7.8%), Yes Bank (-3.6%) and GAIL (-3.5%) were the top NIFTY50 losers. Among the sectors, NIFTY METAL (+1.1%), NIFTY REALTY (0.9%) were the sectoral indices that closed positive. NIFTY PSU banks (-1.5%) and NIFTY AUTO (-0.2%) were the worst performing sectors.

Excerpts from an interview with S. Subramaniam, chief financial officer, Titan Co. Ltd broadcasted on CNBC on 7th November 2019.

  • June onwards it has been really tight and the entire industry has been in turmoil. As far as are we are concerned, our market share gains story is intact but it is unfortunately in a very declining jewellery market.
  • Even from Dussehra to Diwali, which is the festive season, for 33 days they have grown 10%.
  • They are in tough times. Gold prices have been high but, importantly, consumer sentiment has not been encouraging. consumers are trying to save money. They don’t want to invest too much.
  • Gold coins sales being little higher, which means that people who are investing in the category also are looking at it more from the savings perspective rather than actually spending money on jewellery as adornment.
  • They are now looking at 11-13% growth in second half. They also have a higher base but 10% in the festive season was not bad at all under the circumstances.
  • Typically when gold prices do go up there is pent up demand when it comes to the wedding part of the segment, people do have to finally end up investing. So, to some extent we could see a shift on a month-on-month or quarter-on-quarter basis.
  • Even the millennials when they get married, they have exactly the set of jewellery that otherwise would have been bought and if anything the design quotient is much higher these days.
  • They have seen east do quite well, they have seen south do relatively quite well, but the region that gets impacted the most has been west.
  • FY20 is expected to be a fairly bad year. They are not going to meet their 20% target and they have given that guidance also now. Their goal for the next six months is 11-13%.
  • One of the biggest drivers in the last three years has been the gold exchange programme. Today it accounts for almost 40% of the revenues. They need more growth drivers like that.
  • They do not want to have any quarter where they have less than 10% margin. They are well within their own internal plans as far as the margin for the watch business is concerned.
  • They are trying to even it out better than having 18% in the first half and then going down to 7-8% in the second half. So, in FY20, we should look at second half to be more than 10%. So, it is a conscious decision and, therefore, it is not really a fall.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of Titan was ₹ 1,166/- as of 7th November 2019. It traded at 63x/ 48x/ 39x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 18.6/ 24.4/ 29.7 respectively.
  • Consensus target price of ₹ 1,246/- implies a PE multiple of 42x on FY22E EPS of ₹ 29.7/-.
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17 Sep

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.

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