Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
29% increase in jewellery retail space to support volume growth
Our recent interaction with some of the leading jewellery retailers seems to
suggest that jewellery volume growth during the current wedding season could be
muted due to high gold prices. However, we are confident that despite a possible
slowdown in gold demand, Titan will be able to show strong earnings growth
because of a) aggressive new store openings (29% increase in jewellery retail
space, which would support overall volume growth even if same store volume
growth were to decline) and b) gold price (up 37%) is a pass through.
Can Titan maintain growth if the jewellery market starts to slow down?
We believe the company’s strategy to aggressively open new Tanishq stores
should help support volume growth if market growth starts to slow down. Titan
plans to add 100,000sqft of jewellery retail space in FY12, an increase of 29% over
FY11. 74,000 sq ft (74%) has been added in 1HFY12. Therefore, even if the gold
demand in India were to slow, the aggressive store additions should help Titan
elbow out smaller jewellery retailers and grab market share to maintain volume
growth. While volume growth in FY11 was a result of high same store sales
growth, growth in FY12/13 should result from an increase in the number of stores.
Operating leverage to continue to support jewellery margins
The shift to high margin studded jewellery from plain gold jewellery might not be
significant in FY12, but as 80% of the jewellery stores are franchise/semi-franchise
stores, the operating leverage should continue to support the jewellery margin.
The jewellery margin expansion over the last two quarters – despite a marginal
decline in the proportion of studded jewellery – is a testament to our thesis.
34% earnings CAGR (FY11-13) driver of target price of INR 265; risks
Our DCF-derived target price of INR265 is based on 13.75% CoE, 34% earnings
CAGR over FY11-13E. At our target price, the exit multiple is 30x FY13. At the
current stock price of INR186, the stock trades at 21x FY13 earnings. Jewellery
volume decline due to volatility in gold price is the biggest downside risk to our
earnings
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
29% increase in jewellery retail space to support volume growth
Our recent interaction with some of the leading jewellery retailers seems to
suggest that jewellery volume growth during the current wedding season could be
muted due to high gold prices. However, we are confident that despite a possible
slowdown in gold demand, Titan will be able to show strong earnings growth
because of a) aggressive new store openings (29% increase in jewellery retail
space, which would support overall volume growth even if same store volume
growth were to decline) and b) gold price (up 37%) is a pass through.
Can Titan maintain growth if the jewellery market starts to slow down?
We believe the company’s strategy to aggressively open new Tanishq stores
should help support volume growth if market growth starts to slow down. Titan
plans to add 100,000sqft of jewellery retail space in FY12, an increase of 29% over
FY11. 74,000 sq ft (74%) has been added in 1HFY12. Therefore, even if the gold
demand in India were to slow, the aggressive store additions should help Titan
elbow out smaller jewellery retailers and grab market share to maintain volume
growth. While volume growth in FY11 was a result of high same store sales
growth, growth in FY12/13 should result from an increase in the number of stores.
Operating leverage to continue to support jewellery margins
The shift to high margin studded jewellery from plain gold jewellery might not be
significant in FY12, but as 80% of the jewellery stores are franchise/semi-franchise
stores, the operating leverage should continue to support the jewellery margin.
The jewellery margin expansion over the last two quarters – despite a marginal
decline in the proportion of studded jewellery – is a testament to our thesis.
34% earnings CAGR (FY11-13) driver of target price of INR 265; risks
Our DCF-derived target price of INR265 is based on 13.75% CoE, 34% earnings
CAGR over FY11-13E. At our target price, the exit multiple is 30x FY13. At the
current stock price of INR186, the stock trades at 21x FY13 earnings. Jewellery
volume decline due to volatility in gold price is the biggest downside risk to our
earnings
No comments:
Post a Comment