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Titan Industries Ltd Buy
Great franchise, good opportunity. Maintain Buy
Pricing power drives jewellery revenues
We expect strong numbers from Titan, driven by pass-through in gold prices
(see chart showing Titan's jewellery PBT's leverage to gold prices). Typically
jewellery volumes have been sober whenever gold prices have increased
disproportionately. We think 3QFY11 will witness jewellery sales growth of
25% YoY drivern by higher gold prices. We expect watch sales to grow by
18% and net profit to grow by 36% to INR 1.1bn. (refer to the table on the
left).
54% earnings CAGR FY10-12 drives TP of INR 4,200
A 54% CAGR in FY10-FY12E earnings is the driver of our DCF-derived target
price of INR 4,200. We have factored in a relatively higher capex of INR 10bn
over FY10-12E (as against INR 6.3bn in three years, FY08-FY10). Our DCFderived target price of INR 4,200 is based on cost of equity of 13.38% and
a 4% terminal growth rate. At out target price the exit PE works out to 31x
FY12E.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Titan Industries Ltd Buy
Great franchise, good opportunity. Maintain Buy
Pricing power drives jewellery revenues
We expect strong numbers from Titan, driven by pass-through in gold prices
(see chart showing Titan's jewellery PBT's leverage to gold prices). Typically
jewellery volumes have been sober whenever gold prices have increased
disproportionately. We think 3QFY11 will witness jewellery sales growth of
25% YoY drivern by higher gold prices. We expect watch sales to grow by
18% and net profit to grow by 36% to INR 1.1bn. (refer to the table on the
left).
54% earnings CAGR FY10-12 drives TP of INR 4,200
A 54% CAGR in FY10-FY12E earnings is the driver of our DCF-derived target
price of INR 4,200. We have factored in a relatively higher capex of INR 10bn
over FY10-12E (as against INR 6.3bn in three years, FY08-FY10). Our DCFderived target price of INR 4,200 is based on cost of equity of 13.38% and
a 4% terminal growth rate. At out target price the exit PE works out to 31x
FY12E.
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