Titan Industries::Takeaways Motilal Oswal Annual Global Investor Conferences

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Key Takeaways
Consumer demand environment outlook cautious in the near term
 The demand environment is likely to be robust in the medium to long term, given
rising income levels and rise of the urban middle class.
 However, the management believes that growth outlook in the near term may get
impacted by rising interest rates and likely dampening of consumer sentiment.
Jewelry: Volume growth lower than 1Q; margins to sustain at FY11 levels
 The management believes that volume growth of 35% in 1QFY12 unsustainable,
though there is no indication of a major slowdown in July and August.
 PAN card requirement for jewelry purchase above INR0.5m (15-20% of sales) has
no impact on demand and sales.
 Tanishq currently has 121 stores and plans to add 10 new stores in FY12.
 Although the jewelry segment has reported 120bp YoY increase in margins in 1QFY12,
it would be difficult to increase margins beyond FY11 levels.
Watches: Stable growth; margins to be impacted by losses on Helios stores
 Though watch volumes have been stable through July and August, the watch business
is more prone to lower growth if consumer sentiment is impacted.
 Large format watch stores have witnessed a 26% LTL growth in 1QFY12. Premium
brands like Titan and Fastrack are growing faster, resulting in richer sales mix.
 Helios is a focus area, as TTAN plans to take store count to 40 by end-FY12 (9 in
June 2011) and to 100 in two years. This will enable TTAN to capture the growing
demand for high-end luxury watches.
 TTAN is positive on Fastrack as a brand and believes it has strong potential in
watches, eyewear and other accessories. It plans to triple revenue in three years.
Eyewear and Precision Engineering: Eye Plus the new growth driver
 Eyewear has posted an impressive 70% SSS growth in 1QFY12 and the management
is very positive on growth. It has so far added 27 stores during the year (total 177
stores) and plans to increase the number of stores to 250 by FY12.
 Store breakeven for eyewear is expected at 300 stores in FY13.
 TTAN plans to end the current year with sales exceeding INR1b for precision
engineering, with positive bottomline contribution.
Valuation and view
 TTAN remains one of the best plays on increasing consumer discretionary spends.
However, near-term outlook remains cautious due to high inflation, sharp increase
in gold and diamond prices, and Helios store expansion.
 The stock trades at rich valuations of 28.2x FY12E EPS of INR7.2 and 21.8x FY13E
EPS of INR9.3. Neutral.