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Earning Upgrade Continues, Maintain ACCUMULATE |
ACCUMULATE
CMP: Rs3287 Target Price: Rs3762
n Titan reported good performance in ‘Watches’ and ‘Jewellery’ largely propelled by volume growth
n Q2FY11 headline numbers - revenue growth 33.9% yoy to Rs15.4 bn, Operating Profit growth 60% yoy to Rs1.7 bn and APAT growth of 64.6% yoy to Rs1.3 bn
n Key segments posted robust performance – ‘Watches’ grew 19.7% yoy to Rs3.6 bn and Jewellery grew 36.7% yoy to Rs11.2 bn
n 10% earnings upgrade to FY11E (Rs87/Share) and FY12E (Rs112/Share) – Maintain ‘ACCUMULATE’ rating with revised target price of Rs3762/Share
Q2FY11 performance exceeds expectations – 30% ahead of expectations
Titan reported 33.9% yoy growth in net revenues to Rs15.4 bn – ahead of our
expectations. Revenue growth was led by (1) 36.7% yoy growth in ‘Jewellery’ business
to Rs11.2 bn (2) 19.7% yoy growth in ‘Watch’ business to Rs3.5 bn and (3) 80.6% yoy
growth in ‘Other’ business to Rs560 mn. Titan recorded healthy volume growth in
Jewellery (approximately 8%) and Watches (approximately 10%) and gains from
operating leverage. Consequently, Titan reported 190 bps expansion in operating
margins and 60.0% yoy growth in operating profit to Rs1.7 bn. Even, APAT grew by
64.6% yoy to Rs1.3 bn – mirroring growth in operating profit.
Backed by strong volume growth- all business segments posted robust
performance
Alll business segments reported strong performance on back of healthy volume growth
and benefits from operating leverage.
§ ‘Watches’ segment reported 19.7% yoy growth in revenues to Rs3.6 bn & 31.0% yoy
growth in EBIT to Rs763 mn. EBIT margins expanded 190 bps yoy to 21.6%.
§ ‘Jewellery’ segment reported 36.7% yoy growth in revenues to Rs11.2 bn & 73.0%
yoy growth in EBIT to Rs998 mn. EBIT margins expanded 190 bps yoy to 8.9%.
§ ‘Others’ segment that includes ‘Eyewear’ and ‘Precision Engineering’ grew 80.6%
yoy growth in revenues to Rs560 mn. But, posted EBIT loss of Rs47 mn- on
expected lines.
Factor higher margins and volume growth, earnings upgrade of 10% for
FY11E and FY12E, Maintain ‘ACCUMULATE’ rating
Factoring (1) better then expected volume growth in Watches and Jewellery and (2)
benefits of operating leverage – we have upgraded our FY11E and FY12E earnings by
10% to Rs87/Share and Rs116/Share respectively. We continue maintain ‘Titan’ as our
preferred proxy-consumer play. We maintain ‘ACCUMULATE’ rating with revised target
price of Rs3762/Share.
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