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Titan Industries
A p o s i t i v e s u r p r i s e , y e t a g a i n …
Titan Industries’ Q1FY12 was yet another strong quarter and the company
exceeded the Street and our estimates on all fronts. Revenues grew by
61.3% YoY to | 2,020.5 crore, considerably higher than our estimate of
| 1,492.9 crore led by strong appreciation in precious metals and gems’
prices. This performance was aided by strong growth in the jewellery
segment (up 71.9% YoY). The EBITDA margin also increased by 25 bps
QoQ and 313 bps YoY to 9.1% (in line with our estimates) backed by
margin expansion in the jewellery segment. Titan has bounced back to
the 9% operating margin band after reporting an EBITDA margin of 6% in
Q4FY11 due to one-time provision of bonus paid to employees. PAT
increased by 76.4% YoY to | 143.4 crore (I-direct estimate: | 90.2 crore).
This performance was triggered by strong growth in all brands and also
the retail chains. Titan added 30 stores during Q1FY12 taking the total
number of stores to 696. Titan’s network is spread over a retail space of
over 8.7 lakh sq ft as on June, 2011. The management has expressed
concerns on the next couple of quarters bearing in mind the steep rise in
both gold and diamond prices over the last six months.
ƒ Segmental analysis
In QFY12, the jewellery business reported an excellent YoY growth
of 71.9% to | 1,633.7 crore on the back of a steep appreciation in
prices of precious metals and gems. The EBIT margin in the
jewellery segment expanded 169 bps YoY to 8.9%. The watches
segment also grew 23.2% YoY to | 313.1 crore despite slower
growth in the economy segment due to inflationary pressure. EBIT
margin in the watches segment slipped 178 bps to 14.6%.
V a l u a t i o n
While we believe the retail expansion plans of the company will drive
future growth, we remain sceptical about the company’s ability to deliver
strong growth on a higher base. At the CMP, the stock is trading at 42.2x
and 32.1x its FY12E and FY13E EPS of | 5.4 and | 7.1, respectively. We
continue to maintain a HOLD rating on Titan Industries with a target price
of | 213 (based on 30x FY13E EPS of | 7.1).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Titan Industries
A p o s i t i v e s u r p r i s e , y e t a g a i n …
Titan Industries’ Q1FY12 was yet another strong quarter and the company
exceeded the Street and our estimates on all fronts. Revenues grew by
61.3% YoY to | 2,020.5 crore, considerably higher than our estimate of
| 1,492.9 crore led by strong appreciation in precious metals and gems’
prices. This performance was aided by strong growth in the jewellery
segment (up 71.9% YoY). The EBITDA margin also increased by 25 bps
QoQ and 313 bps YoY to 9.1% (in line with our estimates) backed by
margin expansion in the jewellery segment. Titan has bounced back to
the 9% operating margin band after reporting an EBITDA margin of 6% in
Q4FY11 due to one-time provision of bonus paid to employees. PAT
increased by 76.4% YoY to | 143.4 crore (I-direct estimate: | 90.2 crore).
This performance was triggered by strong growth in all brands and also
the retail chains. Titan added 30 stores during Q1FY12 taking the total
number of stores to 696. Titan’s network is spread over a retail space of
over 8.7 lakh sq ft as on June, 2011. The management has expressed
concerns on the next couple of quarters bearing in mind the steep rise in
both gold and diamond prices over the last six months.
ƒ Segmental analysis
In QFY12, the jewellery business reported an excellent YoY growth
of 71.9% to | 1,633.7 crore on the back of a steep appreciation in
prices of precious metals and gems. The EBIT margin in the
jewellery segment expanded 169 bps YoY to 8.9%. The watches
segment also grew 23.2% YoY to | 313.1 crore despite slower
growth in the economy segment due to inflationary pressure. EBIT
margin in the watches segment slipped 178 bps to 14.6%.
V a l u a t i o n
While we believe the retail expansion plans of the company will drive
future growth, we remain sceptical about the company’s ability to deliver
strong growth on a higher base. At the CMP, the stock is trading at 42.2x
and 32.1x its FY12E and FY13E EPS of | 5.4 and | 7.1, respectively. We
continue to maintain a HOLD rating on Titan Industries with a target price
of | 213 (based on 30x FY13E EPS of | 7.1).
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