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Titan Industries Ltd
Continues to glitter
„Strong structural growth story continues; Maintain Buy
Dec Q profit of Rs1.4bn was up 72% yoy and in line with our estimates that were
~25% above consensus. We maintain our FY11-12E estimates which are 20-30%
above street and expect recurrence of such strong results to lead to upgrades.
Sales growth at 47% yoy was very strong and beat our est by 7%. Margin gains
remained robust at 180bp led by gross margin expansion of 60bp yoy highlighting
the strong premiumization trend - our key thesis for the company. Maintain Buy on
strong earnings CAGR of 60% over FY11-12E and consequent re-rating.
Watches: Moving to a higher growth trajectory
We believe Titan’s watch business has shifted to a higher growth trajectory in
terms of sales and margins. This is led by changing outlook towards watches that
are now seen as accessories and not just time telling devices leading to multiple
watch ownership and up trading. Dec Q witnessed a strong 35% sales growth
with 330bp margin gain. The delay in festive season has helped both the volumes
and margins for the category more than our anticipation.
Jewelry: Sales take a breather but margin gains continue
Sales growth came in at 50% which was 7% above our expectations as volume
growth picked up again to 30% despite a strong 20% jump in gold prices. Margins
continued to surge by 200bp as rise in gold prices and rising consumer spending
is leading to shift towards higher margin studded jewelry is gaining momentum.
Strong growth potential justifies valuations; PO Rs3650
Titan is currently trading at 22xFY12E, in line with the sector avg. However, given
EPS CAGR of 60% over FY11-12E, we believe there is a case for further re-rating
of the stock to capture much higher earnings growth potential. Our PO of Rs3650
based on 24xFY12E, in line with its last 5-yr avg and at 10% prem to the sector
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Titan Industries Ltd
Continues to glitter
„Strong structural growth story continues; Maintain Buy
Dec Q profit of Rs1.4bn was up 72% yoy and in line with our estimates that were
~25% above consensus. We maintain our FY11-12E estimates which are 20-30%
above street and expect recurrence of such strong results to lead to upgrades.
Sales growth at 47% yoy was very strong and beat our est by 7%. Margin gains
remained robust at 180bp led by gross margin expansion of 60bp yoy highlighting
the strong premiumization trend - our key thesis for the company. Maintain Buy on
strong earnings CAGR of 60% over FY11-12E and consequent re-rating.
Watches: Moving to a higher growth trajectory
We believe Titan’s watch business has shifted to a higher growth trajectory in
terms of sales and margins. This is led by changing outlook towards watches that
are now seen as accessories and not just time telling devices leading to multiple
watch ownership and up trading. Dec Q witnessed a strong 35% sales growth
with 330bp margin gain. The delay in festive season has helped both the volumes
and margins for the category more than our anticipation.
Jewelry: Sales take a breather but margin gains continue
Sales growth came in at 50% which was 7% above our expectations as volume
growth picked up again to 30% despite a strong 20% jump in gold prices. Margins
continued to surge by 200bp as rise in gold prices and rising consumer spending
is leading to shift towards higher margin studded jewelry is gaining momentum.
Strong growth potential justifies valuations; PO Rs3650
Titan is currently trading at 22xFY12E, in line with the sector avg. However, given
EPS CAGR of 60% over FY11-12E, we believe there is a case for further re-rating
of the stock to capture much higher earnings growth potential. Our PO of Rs3650
based on 24xFY12E, in line with its last 5-yr avg and at 10% prem to the sector
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