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R e c e n t c o r r e c t i o n : a n a t t r a c t i v e e n t r y l e v e l …
Titan Industries (Titan) corrected by ~7–8% in Monday’s trading session.
Over the last three sessions, the stock has corrected by over 12%. We
believe this fall was led by the overall weakness in the stock market and
also falling gold prices (9% fall in both domestic and international gold
prices during the last three trading sessions). However, we continue to
remain positive about the growth prospects of the company. For FY12E,
we have modelled an average gold price of | 22,851/10 gm in our
estimates. The current gold prices are well above these levels.
ƒ Rural initiatives to aid jewellery segment growth
Organised jewellery players are now tapping rural markets to get the
first mover advantage and also gain a higher share of the expanding
rural man’s wallet. Titan plans to aggressively expand its mass
market jewellery franchisee – Goldplus. The company also plans to
launch lower price jewellery using a diamond-like material –
Diamantine to cater to the aspiring middle-class consumer. Titan has
also tied up with Muthoot Finance to offer a new scheme — Swarna
Samridhi — in the Andhra Pradesh market. Under the scheme,
customers have to pay 20% of the actual price during purchase
while the remaining is to be paid through instalments to Muthoot
Finance. The instalments can be paid between 12 and 24 months,
with an 11.5% interest rate. Customers will be given a 30-day
interest-free period to repay the loan amount. Once this model
stabilises it will be taken to other parts of the country as well.
V a l u a t i o n s & V i e w
We continue to remain positive about Titan’s performance, going
forward. While the company may be unable to clock the growth reported
in FY11 (as the higher base effect kicks in), we still expect the company to
deliver a CAGR of 22% and 21% in topline and bottomline, respectively.
We believe that any fall in the price below the | 200/share mark will
provide a good entry position. At the CMP, the stock is trading at 38.1x
and 29.0x 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)
Initiatives in other business segments
Titan to enter Indonesian markets
Titan is planning to enter the Indonesian market in six months through a
distribution tie-up. This is in line with the company’s strategy to expand
into one new country each year.
Price hikes in watches and eyewear segment to protect margins
The company is planning to take a price hike to the extent of 4% to
mitigate the impact of input cost increases. Titan buys some of its
watches and eyewear products from China. China has steadily raised
labour costs over the last three years. Hence, the company will need to
take price hikes to pass on the impact of the same in order to protect its
margins.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R e c e n t c o r r e c t i o n : a n a t t r a c t i v e e n t r y l e v e l …
Titan Industries (Titan) corrected by ~7–8% in Monday’s trading session.
Over the last three sessions, the stock has corrected by over 12%. We
believe this fall was led by the overall weakness in the stock market and
also falling gold prices (9% fall in both domestic and international gold
prices during the last three trading sessions). However, we continue to
remain positive about the growth prospects of the company. For FY12E,
we have modelled an average gold price of | 22,851/10 gm in our
estimates. The current gold prices are well above these levels.
ƒ Rural initiatives to aid jewellery segment growth
Organised jewellery players are now tapping rural markets to get the
first mover advantage and also gain a higher share of the expanding
rural man’s wallet. Titan plans to aggressively expand its mass
market jewellery franchisee – Goldplus. The company also plans to
launch lower price jewellery using a diamond-like material –
Diamantine to cater to the aspiring middle-class consumer. Titan has
also tied up with Muthoot Finance to offer a new scheme — Swarna
Samridhi — in the Andhra Pradesh market. Under the scheme,
customers have to pay 20% of the actual price during purchase
while the remaining is to be paid through instalments to Muthoot
Finance. The instalments can be paid between 12 and 24 months,
with an 11.5% interest rate. Customers will be given a 30-day
interest-free period to repay the loan amount. Once this model
stabilises it will be taken to other parts of the country as well.
V a l u a t i o n s & V i e w
We continue to remain positive about Titan’s performance, going
forward. While the company may be unable to clock the growth reported
in FY11 (as the higher base effect kicks in), we still expect the company to
deliver a CAGR of 22% and 21% in topline and bottomline, respectively.
We believe that any fall in the price below the | 200/share mark will
provide a good entry position. At the CMP, the stock is trading at 38.1x
and 29.0x 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)
Initiatives in other business segments
Titan to enter Indonesian markets
Titan is planning to enter the Indonesian market in six months through a
distribution tie-up. This is in line with the company’s strategy to expand
into one new country each year.
Price hikes in watches and eyewear segment to protect margins
The company is planning to take a price hike to the extent of 4% to
mitigate the impact of input cost increases. Titan buys some of its
watches and eyewear products from China. China has steadily raised
labour costs over the last three years. Hence, the company will need to
take price hikes to pass on the impact of the same in order to protect its
margins.
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