We are committed to reaching normalcy by 4QFY21: Titan MD
Update on the Indian Equity Market:
On Thursday, Nifty ended 2.1% lower at 9,902. The top gainers for Nifty 50 were IndusInd bank (+4.3%), Hero Motocorp (+0.8%) and Nestle India (+0.8%) while the losing stocks for the Infratel (-8.9%), ZEEL (-6.7%) and SBI (-5.6%). All the sectors ended in the red zone. The top losing sectors were PSU Bank (-3.9%), Metal (-2.8%) and Bank (-2.7%).
Edited excerpts of an interview with Mr CK Venkataraman, MD, Titan Company Ltd; dated 10th June 2020 from Retail Economic Times:
- Titan stores have started opening from the first week of May and as of 9th June 2020 nearly 80% of their stores have opened and some of them had seen a four-week run. Titan is trying to get a sense of the trend and it seems that the trend is currently varying across different formats perhaps because there are underlying reasons for people to buy those products.
- The company had started on a cost erosion programme at the end of CY19, without any idea that COVID is going to come the way and therefore it was a very good thing that Titan had reached a certain momentum and some of that showed up in quarter four of FY20 performance and that momentum will continue to carry that effort into FY21 as well.
- The sales levels of FY21E are very uncertain. At the moment, Titan is not seeing any major impact on the gross margins of the various product categories despite pressures. The operating margin or the profit margin for the business will be determined by the final sale level the Company will reach for the year which is very difficult to determine.
- Titan needs to work on creating a desire for products in the customers’ mind even when they are sitting at home. It would involve either getting them to come to the stores or enabling them to buy from home.
- Marriages are now going to be less grand and the families are going to have more money in their hands which they have not spent on five-star hotels or catering for 2,000 people at lunch and dinner and so on. The industry as well Titan can influence them to flow into jewellery purchase. Thus, Titan bets there to be a higher demand for jewellery.
- Demand is going to be sluggish but the basic need of people to socialise is not going to go. He is sure that in three-four months from now, people will start doing that and their products will become part of that socialising.
- Innovation will help the Company in CY2021E.
Consensus Estimate: (Source: market screener and investing websites)
- The closing price of Titan Company Ltd was ₹ 951/- as of 11-June-2020. It traded at 74.9x/ 44.0x the consensus EPS estimate of ₹ 12.7/21.6 for FY21E/ FY22E respectively.
- The consensus target price of ₹ 1036/- implies a PE multiple of 48.0x on FY22E EPS of ₹ 21.6/-.
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