CMP:
Rs. 361.35; Market Cap: Rs. 32,080.15 Cr; 52 Week High/Low: Rs. 448.40 /
Rs. 302.75.
Total
Shares: 88,77,86,160 shares; Promoters : 47,10,07,920 shares – 53.05 %; Total
Public holding : 41,67,78,240 shares – 46.94 %; Book Value: Rs. 34.83; Face Value: Rs. 1.00; EPS: Rs. 7.91;
Dividend: 230.00 % ; P/E: 45.68 times; Ind. P/E: 39.63; EV/EBITDA: 31.21;
Total Debt: Rs. 99.79 Cr; Enterprise Value: Rs. 32,012.34 Cr.
TITAN COMPANY LTD: The Company was founded on 26th July 1984
and is based in Bengaluru, India. Titan was promoted jointly by Questar Investments Ltd a Tata Company with its associates Tata Sons Ltd and Tata Press Ltd and the Tamil Nadu Industrial Development Corporation (TIDCO) with main obective to manufacture analog electonic watches with over 150 designs. The company was earlier known as Titan Watches Ltd and changed its name to Titan Industries Ltd in 1993 and again in 2013 the company changed its name to Titan Company Ltd. The Company had declared split in face value of its shares from Rs. 10 to Rs. 1 on 29 April 2011 and on same date it also declared bonus in ratio of 1:1. Titan Industries
Limited manufactures and retail sale of watches, jewelry, clocks, and eye wear
primarily in India and internationally. The company provides its watches under Titan
Edge, Titan Raga, Nebula, Sonata, Xylys, Fastrack brands. It also
markets international brands, such as Versace, Seiko, Tommy Hilfiger, Hugo Boss,
Esprit, Raymond Weil, DKNY, Baume & Mercier and Victorinox under a
licensed agreement. It also offers jewelry under the Tanishq and Goldplus brand
names, as well as operates a chain of luxury jewelry boutiques under the Zoya
brand. In addition, the company provides sunglasses under its Fastrack brand;
and prescription eyewear, such as lenses and contact lenses. It sells frames,
sunglasses, and accessories of proprietary brands and other premium brands, as
well as provides optometry services. Further, the company provides precision
engineering components and sub-assemblies, machine building and automation
solutions, tooling solutions, and electronic sub-assemblies for use various
industries, in aerospace, automotive, oil and gas, engineering, hydraulics, solar,
and medical instruments. It operates approximately 1100 retail stores across a carpet area of over 1.3 million sq. ft. spanning over 204 towns. The company has over 364 World of Titan showrooms; over 140 Fastrack stores; 928 after-sales-service centers; It also
has approximately 145 Tanishq
boutiques and 2 Zoya stores; over 31
Gold Plus stores; and approximately 220
Titan Eye+ stores. The company has around 7,000
employees, two exclusive design
studios for watches and Jewellery, 10
manufacturing units. The company also sells its product through departmental
stores such as Shoppers stop, Central, Westside, Pantaloons & Reliance
retail. Titan Industries Ltd is locally compared with Renaissance Jewelery, Goldiam International, Atlas Jewellery India Ltd, Winsome Diamonds, Parekh Platinum, Gitanjali Gems Ltd,
Surana Corporation Limited, Shrenuj & company, Rajesh Exports, Shree Ganesh
Jewellary House I Ltd, SBT & International and globally compared with Citizen Holdings Co Ltd of
Japan, Casio Computer Co Ltd of Japan, F&A Aqua Holdings INC of Japan,
Guess? INC of USA, Rolex of Switzerland, Omega of Switzerland, Oakley of USA,
Timex of USA, Seiko of Japan, TAG Heuer of Switzerland, Patek Philippe of
Switzerland, Swatch Group of Europe .
Investment Rationale:
Titan Industries
Ltd is the world’s fifth largest integrated watch manufacturer with a market
share of around 65 % in the domestic organised watch market and also enjoys
market share of around 40 % in the organised jewellery retailing market where
the company offers gold and diamond jewellery through its popular brands -
Tanishq, Gold Plus and Zoya. Titan Industries Ltd is the organization
that brought about a paradigm shift in the Indian watch market when it
introduced its futuristic quartz technology, complemented by international
styling. India is the fifth largest retail destination globally and the Indian
retail industry has experienced tremendous growth over the last decade with a
significant shift towards organised retailing format and development taking place
not just in major cities and metros, but also in Tier II and Tier III cities. The
overall retail market in India is likely to reach Rs. 47 trillion by FY 17. As India’s
retail industry aggressively expands itself, online medium of retail is gaining
more and more acceptance there is a tremendous growth opportunity for retail
companies, both domestic and international. Favourable demographics, increasing
urbanisation, nuclear families, rising affluence amid consumers, growing
preference for branded products and higher aspirations are other factors which drives
retail consumption in India. Both organised and unorganised retail are bound
not only to coexist but also achieve rapid and sustained growth in the coming years.
The Indian retail market, currently estimated at around US$ 490 billion, is
project to grow at a compound annual growth rate of 6 % to reach US$ 865
billion by 2023. Organised retail, which constituted 7 % of total retail in 2011–12,
is estimated to grow at a CAGR of 24 % and attain 10.25 % share of total retail
by 2016–17. India has about 10 lakhs online retailers – small and large – which
sell their products through various ecommerce portals. India remains a largely
untapped and unorganised retail market, with several international retail companies
yet to commence operations in the country. India holds a substantial advantage
over other emerging retail destinations owing to its strong domestic
consumption and low rate of market penetration by overseas retailers. India's
new middle class is increasingly becoming brand conscious and willing to spend
on quality goods, a trend which is creating numerous business opportunities for
mid-range international brands. With political and economic sentiments already
showing signs of improvement, this could be the right time for international retailers
to look at India for expansion into the region. With this growth in the
ecommerce Industry, online retail is estimated to reach US$ 70 billion by 2020
from US$ 0.6 billion in 2011. According
to the World Gold Council, gold demand rose 15 % in Q3 2015; the council
maintains that demand grew in both the urban and rural segments. The overall long‐term environment remains exciting considering
the Indian consumption story. The 3 aspects of consumption i.e. the demographic
dividend, rising incomes of Indian consumers and growing aspirations of Indians
excites the company. Titan Company participates in
categories that are unorganised, under‐served and under‐penetrated. Titan always tries to make pro consumer choices for example in the watch
business, the company moved from mechanical watches to quartz watches. Being in
the unorganized sector also has its pros like large opportunity in branded
space, improved quality of competition and category transformation and cons like
non level playing field for organized players and regulations. Titan derives 80 % of its revenues from Jewellery business. Titan
has 4 % market share in gold Jewellery & 7 % market share in diamond
segment. The jewellery industry faced setback in last couple of years on the
back of government regulations to limit the import & consumption of gold,
and changes in Gold deposit scheme. Customer purchases have largely been distorted
on the back of volatility in gold prices and discontinuation of Golden Harvest
Scheme from which Titan derives 30 % of its jewellery business. However, it is
expected that the demand for jewellery to be stable as it is more of essential
& cultural aspect in respect to Indian society, though the timing of
purchase may vary. It is evident that Titan’s management has taken initiatives
in the last 12-18 months to bring back its mojo which gives confidence and is
expected to be a continuous process to spur up its revenues. Titan is slashing
its making charges from 12 % to 8 % in order to overcome the stiff competition
especially in southern markets; also they re-launched Golden Harvest schemes,
launched designer collections and roped in Deepika Padukone as brand ambassador
for Tanishq. The management did not state the specific
numbers for store expansion but plans are on. The festive season has started on a decent
note as per the management and it expects sales to recover in the coming
quarters too. With recovery in sales, margins are expected to move back to the
normalised range of 9 % to 10 % with activations, the management expects the
share of studded jewellery to improve as against 24 % reported in the current
quarter, which is also expected to assist in margin expansion. The volume
growth in watch business remained flat. Higher realisations and exports led the
growth in this category with impressive margins. Also, the company witnessed
lower walk-ins in the World of Titan stores, Helios but the large format stores
performed well. The management expects hedging benefits to come in the next
couple of quarters. It also stated that the company has been able to negotiate
favourable gold lease rates. Titan will
enter categories that cater to personal lifestyles, involve branding and design
and which have national play.
Titan has achieved leadership in the watches segment in 5 years from its entry. Of the total 52 million watches sold in India, only 16 million watches can be accounted for; balance are in the grey market. Titan still continues to explore unorganized segments in the market. Titan is promoting a culture of innovation across products, business models, brands, customer touch points and customer experience. The company promotes innovation in the organization through initiatives like Titan Innovation Bazaar, Innovation School of Management etc. Eg of innovations are Edge watches, diamond sorting machines (first time in the world). In its business model also Titan has chosen the end‐to‐end business model (vertically integrated), but is open to change. Eg getting jewellery manufactures outside but it keeps a close watch on the process. Titan has the largest network of after sale service for watches in India. This is proving to be an advantage as foreign brands entering India are using the network built by Titan. Titan has assiduously positioned itself in the premium designer jewellery space. Titan has the ability to create significant value with its large distribution presence, strong brand, designing skills and proven execution track record. Titan has proved its metal time and again by emerging strong and successful against various regulatory hurdles that have emerged over the past one year. With robust balance sheet, strong brand equity and professional management team in place gives the bullish sentiments on Titan
Titan has achieved leadership in the watches segment in 5 years from its entry. Of the total 52 million watches sold in India, only 16 million watches can be accounted for; balance are in the grey market. Titan still continues to explore unorganized segments in the market. Titan is promoting a culture of innovation across products, business models, brands, customer touch points and customer experience. The company promotes innovation in the organization through initiatives like Titan Innovation Bazaar, Innovation School of Management etc. Eg of innovations are Edge watches, diamond sorting machines (first time in the world). In its business model also Titan has chosen the end‐to‐end business model (vertically integrated), but is open to change. Eg getting jewellery manufactures outside but it keeps a close watch on the process. Titan has the largest network of after sale service for watches in India. This is proving to be an advantage as foreign brands entering India are using the network built by Titan. Titan has assiduously positioned itself in the premium designer jewellery space. Titan has the ability to create significant value with its large distribution presence, strong brand, designing skills and proven execution track record. Titan has proved its metal time and again by emerging strong and successful against various regulatory hurdles that have emerged over the past one year. With robust balance sheet, strong brand equity and professional management team in place gives the bullish sentiments on Titan
Outlook and Valuation:
KEY FINANCIALS | FY14 | FY15 | FY16E | FY17E |
---|---|---|---|---|
SALES (₹ Crs) | 10,915.80 | 11,903.20 | 12,330.50 | 14,017.60 |
NET PROFIT (₹ Cr) | 757.10 | 832.70 | 831.70 | 993.80 |
EPS (₹) | 8.53 | 9.38 | 8.37 | 11.19 |
PE (x) | 42.70 | 38.80 | 38.90 | 32.50 |
P/BV (x) | 12.90 | 10.50 | 9.20 | 8.20 |
EV/EBITDA (x) | 30.70 | 27.70 | 28.00 | 23.30 |
ROE (%) | 33.90 | 29.80 | 25.30 | 26.70 |
ROCE (%) | 19.80 | 19.80 | 17.70 | 19.20 |
*As the author of this blog I disclose that I do not hold TITAN COMPANY in my any of the portfolios.
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Disclaimer:
Disclaimer:
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Great information about Titan. It's been a brand trust by us since ages. Nice to know such detailed facts about the company. Thanks for sharing Bhavikk :)
ReplyDeleteWow! What a research, Bhavikk! Good information to know!
ReplyDeleteAgain, an in-depth post about the TiTan. Great one :)
ReplyDeleteSir wish you a happy new year.
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