Titan Company - visit note-Jul-17-EDEL -...

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Our recent interaction with Titan Company’s (Titan) management and visit to Taneira store (saree venture) in Bengaluru reinforce our confidence in the company’s bright prospects. Management perceives GST as a positive development and a potent catalyst for compliant players like Tanishq to gain market share. Growth remains key agenda—targeting 2.5x jump in jewellery business by FY22, ~20% CAGR from current INR102bn sales. Moreover, entry in the saree business via Taneira with 2 pilot stores in Bengaluru has exceeded Titan’s expectations; planning to test waters in Mumbai and Delhi as well. In Q1FY18, performance across businesses was good, especially jewellery (50% growth over Akshay Tritiya in FY17). Maintain ‘BUY’.

GST: Jewellery to shine; slight negative for other segments

Management believes GST will enhance overall compliance level in the jewellery

industry—root out practice of making multiple bills for single transaction to circumvent

the INR0.2mn PAN card rule. Though increase in tax rate on watches and sun glasses to

28% post GST from ~23‐24% earlier is a negative, Titan expects the impact to be

negligible as it will avail 400‐500bps as input tax credit on rentals and advertisement.

The company will, however, compensate distributors for any loss incurred due to

increase in the tax rate.

New businesses: On a roll; eyeing expansions

The Skinn (perfumes) business is doing well and Titan is targeting doubling of sales led

by entry in new categories (body mist) and expansion of distribution reach. Similarly,

Taneira will be expanded pan‐India post completion of the test market phase—initial

response has exceeded expectations. Also, in watches, new launches with smart

features—Fastrack Reflex (smart band)—are on the anvil.

Outlook and valuations: Positive; maintain ‘BUY’

We envisage Titan to be key beneficiary of share gains led by GST, while entry in new

segments and retail expansion will boost growth. Moreover, rising share of studded

jewellery and cost optimisation will aid margin. The stock is currently trading at 37.5x

FY19E EPS. We recommend ‘BUY‘ and rate it ‘SO’ with target price of INR600.

VISIT NOTE

TITAN COMPANYNovel nudge, thriving share to prop up growth

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Outperform

Risk Rating Relative to Sector Low

Sector Relative to Market Underweight

MARKET DATA (R: TITN.BO, B: TTAN IN)

CMP : INR 536

Target Price : INR 600

52‐week range (INR) : 569 / 296

Share in issue (mn) : 887.8

M cap (INR bn/USD mn) : 475 / 7,346

Avg. Daily Vol.BSE/NSE(‘000) : 1,744.3 SHARE HOLDING PATTERN (%)

Current Q3FY17 Q2FY17

Promoters *

53.1 53.1 53.1

MF's, FI's & BK’s 5.4 6.0 4.5

FII's 21.1 20.2 22.0

Others 20.4 20.8 20.4

* Promoters pledged shares (% of share in issue)

: NIL

PRICE PERFORMANCE (%)

Stock Nifty

EW Retail Index

1 month 13.5 (0.4) (0.3)

3 months 16.6 4.1 4.0

12 months 32.2 14.8 23.7

Abneesh Roy +91 22 6620 3141

[email protected]

Tanmay Sharma, CFA +91 22 4040 7586

[email protected]

Alok Shah +91 22 6620 3040

[email protected]

India Equity Research| Retail

July 5, 2017

FinancialsYear to March FY16 FY17E FY18E FY19ERevenues (INR mn) 112,759 129,789 151,871 179,217Rev. growth (%) (5.4) 15.1 17.0 18.0EBITDA (INR mn) 9,347 11,555 15,035 19,176Adjusted Profit (INR mn) 6,745 8,000 10,010 12,683Adjusted Diluted EPS (INR) 7.6 9.0 11.3 14.3EPS growth (%) (17.4) 18.6 25.1 26.7Diluted P/E (x) 70.5 59.4 47.5 37.5EV/EBITDA (x) 50.8 40.8 31.5 24.6ROAE (%) 20.5 21.5 23.5 25.3

Retail

2 Edelweiss Securities Limited

Titan Q1FY18 preview: Our expectation

Market share improvement is likely to sustain in Q1FY18 as well, further aided by GST

implementation. Titan had clocked good growth in Q1FY18 led by favourable base, strong

Akshay Tritiya (50% growth over Akshay Tritiya in FY17 period), new launches and refreshes

in existing brands as well as successful gold exchange programme and activations in studded

jewellery. We expect jewellery sales to jump ~25% YoY on a base of 3.2% (Q4FY17 sales had

jumped 55% YoY spearheaded by strong festive and wedding season on base of 1%). In

watches, retail formats are likely to record healthy revenue growth, but top line may remain

flat due to rescheduling of Titan and Fastrack activations. Eye plus retail format should

continue to post healthy LTL growth in Q1FY18. However, slowdown in sunglasses is likely to

dent overall sales growth. We estimate ~5% YoY growth in eyewear on a base on 2.9% YoY

in Q1FY17 (clocked 13.1% YoY in Q4FY17 on a base of 10% YoY). Table 1: Q1FY18E preview for Titan

Source: Edelweiss research

Meeting with management: Key takeaways

Jewellery

Titan’s focus is to grow jewellery sales 2.5x over the next 5 years.

On the margin front, dilution is unlikely; some margin expansion will be led by

operating leverage which will be reinvested in the business to drive overall growth.

Titan will even reinvest in new growth drivers such as Taneira and could even eye

inorganic growth.

Currently, the company is running a gold exchange scheme. Titan gets 40‐45% of gold

through the exchange route.

Dubai is mulling 5% sales tax on gold. This will eliminate the advantage of buying gold in

the country.

Post demonetisation, the company has gained market share. However, on‐ground

situation has recovered post that for unorganised jewellers, though compliance has

increased.

Making multiple bills for single transaction will become difficult under the GST regime

as tax will have to be paid on a particular product for which a mapping mechanism

will be in place, separate IDs for a product will be mandatory etc.

Currently, Tanishq is in close to 150 towns and could expand to more 100 towns. Rate

of new store addition is 25 stores per year. Hence, scope for expansion is humungous.

Titan is focusing on the omni‐channel as well as it can be effective in the jewellery

segment—a customer can choose an assortment online and purchase it offline, book

online etc. The company’s large collections are being downloaded by millions from its

website. This indicates that consumers are first witnessing products online and then

purchasing them offline.

Q1FY18E Q1FY17 Q4FY16 (IGAAP) YoY growth (%) Q4FY17 QoQ growth (%)

Revenues 33,422 27,988 24,563 19.4 34,297 (2.6)

EBITDA 3,309 2,922 2,101 13.3 2,721 21.6

PAT 2,382 2,236 1,841 6.5 2,029 17.4

Other income 150 134 237 273

Tax 752 471 139 658

EBITDA margin 9.9 10.4 7.9

Titan Company


Tanishq advertisements have shifted from TV to online channels such as youtube.

E‐commerce will do well at a particular price point; not at a very high ticket price.

Caratlane is also clocking good growth, in line with expectations. Integration of this

business with Titan is progressing well and has also helped take the eyewear business

online. Titan’s current stake in Caratlane stands at 65%.

Consumer sentiments as well as demand recovered significantly (post demonetisation)

by the beginning of Q4FY17.

The company posted double digit growth in April. Akshay Tritiya was strong for the

jewellery business.

Not facing problems in getting franchisees for Tanishq.

Confident of strong growth in FY18 led by wedding season, high‐value diamond

jewellery and market share, GHS & network expansion.

Targeting ~17% YoY growth in FY18, similar to FY17.

Watches

Recently launched smartband Fastrack (Reflex) is doing well and the company is

placing re‐orders to meet the rising demand. It is manufactured in China.

The company is planning to launch a ladies smart watch in the near future which will be

lighter and a more feminine hybrid offering.

Juxt collection did well and has been completely sold out. However, Pro collection has

not been very successful.

To revive growth in watches, the company has many smart products in the pipeline.

Taneira (we visited the store as well)

Taneira has been doing very well and has exceeded initial expectations of the company.

The collection entails handloom sarees from across India (20 states).

Price point can range from INR2,500‐0.25mn for a saree.

Success of Taneira will be apparent by 2018 end.

The company is also organizing exhibitions for Taneira in Tier 1 and 2 cities to gauge

market potential in the coming year.

Standard size of a Taneira store can be 3,000‐4,000sq ft. However, Indira Nagar store is

a bungalow and the Jaya Nagar store is a 3 storey building. Both the stores are doing

well, but the company as of now is experimenting as far as store format is concerned.

Taneira will not be a daily wear brand and has been positioned as a special wear

occasion.

The company will do pilots in at least 2 or 3 more metros. Already has 2 stores in

Bengaluru (can launch 1 store each in Delhi and Mumbai).

GST

Under GST, while spectacles will be taxed at 12%, frames at 18%. A combination of

these will be taxed at 12%. Tax on sunglasses, however, has been increased to 28%—a

negative. Sunglasses were imported and effective rate was far lower and GST rate has

increased it significantly – sunglasses however is not a big part of the business (~earlier

it was less than 24%).

Retail


GST on watches has been increased to 28%. Earlier, it attracted 22‐23% tax. The

company will consider price hike after taking into account the input tax credit,

compensation to franchise etc. It will compensate the channel partner for the loss it

may suffer due to increase in the tax rate.

GST will lead to high compliance which is good for the company. However, during the

transition phase even Titan will face some issues.

Transition is more painful from compliance and working capital (will not get credit for

sometime) perspective.

Most of the company’s vendors are big and hence are also largely ready. Titan has been

engaging with them to get themselves registered for GST.

In terms of Karigars, it is Titan’s responsibility to implement GST.

GST can be beneficial for franchises as well since they can take the credit of service tax

on rentals.

Consumer demand is not expected to be impacted due to GST.

Titan will compensate franchises for any margin loss due to GST as their cost will

increase.

Eyewear and other businesses

Lenskart is doing what Titan Eye is doing by going in the brick and mortar store – one

need to get eye tested.

Other regional players are also present which are giving affordable pricing. Eg. Chain

Specsmarkers is present only in Tamil Nadu and Karnataka with 80 stores is doing well

by giving affordable pricing.

Titan Eye’s pricing will be higher than Lenskart’s as its products are of better quality.

Fashion quotient for eyewear has increased significantly. Lenskart has promoted the

same which Titan has learnt.

Skinn (perfume) is doing very well and growth is on track. Target is to double the

business; will take 3‐4 years to achieve profitability. The company is planning entry in

adjacent categories such as body mist.

Currently, in fragrances, Shinn is present in large departmental stores, World of Titan,

Maxx, Health and Glow. Target is to expand the distribution reach. In departmental

stores the company is the second most selling perfume already.

Accessories such as belts, wallets etc., are not a focus area.

Titan Company


Fig. 1: Titan new venture in sarees – Taneira

Source: Company

Table 1: Trends at a glance

Source: Company, Edelweiss research

Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17

Watches & clocks sales growth (% YoY) (1.9) 1.8 9.1 5.5 9.3 (12.1) 1.5 (5.2) 5.1 10.8

Watches volume growth (% YoY) (4.0) (6.0) (4.0) ‐ ‐ (19.0) 1.0 (9.0) 6.0 6.0

Jewellery sales growth (% YoY) 11.2 (15.3) (10.9) (32.3) 20.1 1.0 3.2 0.2 15.2 55.0

Jewellery gramage growth (% YoY) 25.0 (11.0) (10.0) (10.0) 28.0 15.0 6.0 (32.0) 4.0 4.0

Gold price change (% YoY) (3.0) (5.0) (13.0) (7.0) 7.0 13.0 20.0 21.0 14.0 14.0

Eyewear sales growth (% YoY) NA NA 19.7 16.5 3.2 10.0 2.9 6.6 12.4 13.1

Others sales growth (% YoY) NA NA 36.3 (6.8) (5.7) (82.3) 36.4 20.0 44.5 19.2

World of Titan (3.0) 5.0 ‐ (4.0) 3.0 (9.0) 6.0 (2.0) 9.0 5.0

Tanishq (8.0) (25.0) (12.0) (40.0) 30.0 (5.0) 3.0 4.0 15.0 52.0

Goldplus 30.0 (4.0) (24.0) (28.0) (9.0) (16.0) (1.0) (7.0) 8.0 NA

Helios 4.0 3.0 4.0 14.0 14.0 15.0 13.0 1.0 11.0 (3.0)

Fastrack (6.0) (4.0) (4.0) (9.0) (5.0) (5.0) (1.0) (5.0) 1.0 (1.0)

LFS ‐ Watches (5.0) 8.0 ‐ 8.0 17.0 (7.0) 16.0 4.0 13.0 3.0

Titan Eye+ 9.0 ‐ 13.0 1.0 (2.0) 7.0 4.0 4.0 1.0

Watches & clocks 9.7 9.6 9.9 15.1 6.7 1.7 14.3 12.3 10.4 2.4

Jewellery 9.6 12.7 8.7 6.1 10.3 11.3 10.2 11.0 10.3 9.9

Eyewear NA 10.8 1.8 4.8 0.9 13.8 5.9 2.1 (3.2) 9.8

Others NA (14.4) (22.8) (9.3) (24.1) (70.0) (3.1) (8.2) (8.7) (103.4)

LTL sales growth (%)

PBIT margins %

Retail


Table 2: Store expansion

Source: Company, Edelweiss research

Outlook and valuations: Positive; maintain ‘BUY’

Demand has started witnessing signs of improvement particularly urban demand. Titan

stands to benefit of retail expansion—added ~0.4mn sq ft of retail space in jewellery during

FY12‐16 on base of 0.46mn sq ft. However the company added only 62,000 sq ft in Tanishq –

has targeted to go for aggressive growth in FY18 and hence will focus on expansion in

smaller towns and increasing share in high‐margin wedding jewellery segment

(management believes ~15‐20 stores can be added annually to tap demand in smaller

towns).

We expect that growth in FY18 will remain strong not only led by entry into higher value

wedding jewellery segment, store expansion but also led by new version of GHS –

enrolment are increasing on a month on month basis and rising preference for Tanishq

brand, especially post the cut in making charges (which has made it accessible to a larger

consumer base), steady shift in preference to organised jewellers from unorganised players

and higher studded share. The year has started with a strong growth in the jewellery

business (50% YoY growth in Akshya Tritiya period) and the company has not seen much

impact due to GST implementation. Organised players such as Titan are gaining market

share led by demonetization and will also gain with GST coming in. and hence we expect

market share gains to sustain. Improvement in productivity in manufacturing, sourcing and

rising margin in studded jewellery have helped Titan maintain margin, despite cut in making

charges. Innovations like Uttara, Niloufer etc., have done well and will not only drive overall

growth, but also aid margin by increasing studded share.. Also, earlier launch of innovative

collections like Divyam and Zuhur will improve sales of higher‐ticket items in jewellery, thus

improving mix. Titan has also sharpened focus on wedding jewellery, which is a low hanging

fruit. Apart from jewellery, watches and eyewear segment has also started witnessing good

growth – expected to sustain helped by new launches and steps such as closure of loss

making stores, inventory management etc. We assign a target multiple of 42x to arrive at a

target price of INR600. We maintain ‘BUY /Sector Outperformer’.

Store expansion FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17

Jewellery 198 209 212 216 221 227 229 229 235 239

Tanishq 163 174 177 181 186 193 197 198 204 208

Goldplus 33 33 33 33 33 32 30 29 29 29

Mia NA NA NA NA NA NA NA NA 32 32

Carat Lane NA NA NA NA NA NA NA NA 14 15

Zoya 2 2 2 2 2 2 2 2 2 2

Watches 600 626 627 632 646 652 659 674 672 678

World of Titan 401 430 427 434 446 452 458 467 470 474

Fastrack 150 154 157 157 159 159 160 163 155 155

Helios 49 42 43 41 41 41 41 44 47 49

EyePlus 280 366 384 398 399 404 405 406 428 448

Total 1,078 1,201 1,223 1,246 1,266 1,283 1,293 1,309 1,335 1,365

Titan Company


Company Description

Titan was incorporated in 1984 as a joint venture between the TATA Group and Tamil Nadu

Industrial Development Corporation (TIDCO), a Government of Tamil Nadu undertaking. The

company manufactures and markets quartz watches since 1987 and is now India’s leading

watch manufacturer and retailer. Gradually, jewellery, precision engineering, eyewear,

accessories, and licensed products were added to the watches portfolio. The Titan brand

was extended to Tanishq and other retail businesses. Jewellery business now contributes

~80% to sales with Tanishq being the largest (has jewellery retail space of ~0.9mn sq ft) and

most reputed jeweller in the organized space. Investment Theme

The Indian retail landscape is evolving with interplay of several demographic and economic

factors. The long‐term prospects backed by changing consumer behaviour in favour of larger

discretionary spending, has set the stage for a healthy growth in the retail space over the

next five years. The big opportunity lies in the growing share of organised retail with

growing trend among consumers to allocate a larger share of income to consumption and

gradual improvement in lifestyle.

Titan has assiduously positioned itself in the premium designer jewellery space. We believe

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 we remain bullish on Titan.

Key Risks

Reduction in customs duty: Customs duty which is currently at 10% has lead to rampant

smuggling and it is likely that it will be reduced in the near term. Any reduction in custom

duty will lead to write back in inventory.

Deterioration of macro conditions: Poor macro outlook could lead to prolonged slowdown

in the company’s growth as the company’s revenues depend on discretionary spend.

Volatility in gold prices: Gold prices have a significant bearing on gold demand. Any steep

rise in prices results in lower demand, and investment buying that comes in is low margin.

Margin pressure due to deterioration in product mix and investment buying: Down trading

in watches and jewellery divisions on account of fall in discretionary spending and higher

growth in tier II and IV towns could impact margins.

Business seasonal, restricted to marriage season and festivals: The jewellery segment is

seasonal with respect to marriage season and festivals. Additionally, the number of wedding

dates varies in a year. This could impact the company’s revenue.

Regulatory hurdles: As gold is one of the key import articles, Government actions to curb its

demand thereby impacts the jewellery business by reducing demand and/or increasing

costs like customs duty, lease rate, etc if not eased / tightened further pose a risk to the

jewellery business.


Retail

Financial Statements

Income statement (INR mn)

Year to March FY16 FY17 FY18E FY19E

Net revenue 112,759 129,789 151,871 179,217

Materials costs 81,807 94,292 109,347 128,140

Gross profit 30,952 35,497 42,524 51,077

Employee costs 6,963 7,939 8,960 10,215

Other Expenses 10,347 11,374 13,213 15,413

Ad. & sales costs 4,295 4,630 5,315 6,273

EBITDA 9,347 11,555 15,035 19,176

Depreciation 982 1,105 1,319 1,455

EBIT 8,366 10,450 13,717 17,722

Add: Other income 739.2 704.9 739.9 540.51

Less: Interest Expense 424 377 562 655

Add: Exceptional items ‐ (1,027) ‐ ‐

Profit Before Tax 8,681 9,750 13,895 17,608

Less: Provision for Tax 1,916 2,760 3,891 4,930

Associate profit share 20 18 (6) (6)

Reported Profit 6,745 6,973 10,010 12,683

Exceptional Items ‐ (1,027) ‐ ‐

Adjusted Profit 6,745 8,000 10,010 12,683

Shares o /s (mn) 888 888 888 888

Adjusted Basic EPS 7.6 9.0 11.3 14.3

Diluted shares o/s (mn) 888 888 888 888

Adjusted Diluted EPS 7.6 9.0 11.3 14.3

Adjusted Cash EPS 8.7 10.3 12.8 15.9

Dividend per share (DPS) 2.2 2.4 3.4 4.3

Dividend Payout Ratio(%) 34.8 35.1 35.1 35.1

Common size metrics


Materials costs 72.6 72.7 72.0 71.5

Staff costs 6.2 6.1 5.9 5.7

Ad. & sales costs 3.8 3.6 3.5 3.5

Other expenses 9.2 8.8 8.7 8.6

Depreciation 0.9 0.9 0.9 0.8

Interest Expense 0.4 0.3 0.4 0.4

EBITDA margins 8.3 8.9 9.9 10.7

EBIT margins 7.4 8.1 9.0 9.9

Net Profit margins 6.0 6.2 6.6 7.1

Growth ratios (%)


Revenues (5.4) 15.1 17.0 18.0

EBITDA (18.6) 23.6 30.1 27.5

PBT (17.2) 12.3 42.5 26.7

Adjusted Profit (17.4) 18.6 25.1 26.7

EPS (17.4) 18.6 25.1 26.7

Key Assumptions


Company

GDP(Y‐o‐Y %) 7.2 6.5 7.1 7.7

Inflation (Avg) 4.9 4.8 5.0 5.2

Repo rate (exit rate) 6.8 6.3 6.3 6.3

USD/INR (Avg) 65.0 67.5 67.0 67.0

Watch ‐ growth (%) 1.6 3.0 12.0 15.0

Jewellery ‐ growth (%) (7.6) 18.6 18.0 18.5

Eyewear ‐ growth (%) 11.8 8.5 12.0 15.0

EBITDA margin (%)

COGS as % of sales 72.6 72.7 72.0 71.5

Gold as % of COGS 80.5 80.5 80.5 80.5

Components as % of COGS 9.6 9.6 9.6 9.6

Purchases (% of COGS) 17.2 17.2 17.2 17.2

Staff costs (% of rev) 6.2 6.1 5.9 5.7

A&P as % of sales 3.8 3.6 3.5 3.5

Financial assumptions

Tax rate (%) 22.1 25.6 28.0 28.0

EBITDA margin 8.3 8.9 9.9 10.7

Capex (INR mn) 1,568 4,332 2,000 2,000

Debtor days 21 15 20 20

Inventory days 190 189 190 190

Payable days 82 90 90 90

Cash conversion cycle 128 114 120 120

Dep. (% gross block) 7.2 6.7 6.8 6.8

Interest rate on cash 54.9 13.3 14.0 16.0

Dividend payout ‐ 30.0 30.0 30.0


Titan Company

Peer comparison valuation

Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%)

Name (USD mn) FY18E FY19E FY18E FY19E FY18E FY19E

Titan Company 7,346 47.5 37.5 31.5 24.6 23.5 25.3

Future Retail ‐ ‐ 2.8 4.2

Jubilant Foodworks 1,045 48.9 39.9 18.7 15.7 16.0 17.4

Shoppers Stop 449 85.8 28.2 14.3 9.6 (2.6) 13.3

Wonderla Holidays 315 35.8 24.5 18.0 12.4 12.6 16.5

Median ‐ 47.5 37.5 18.0 15.7 12.6 17.4

AVERAGE ‐ 43.6 32.5 17.1 15.6 10.7 18.1

Source: Edelweiss research

Cash flow metrics


Operating cash flow 5,925 11,113 4,163 7,705

Investing cash flow (3,908) (4,332) (2,000) (2,000)

Financing cash flow (2,642) (2,843) (4,069) (5,100)

Net cash Flow (625) 3,939 (1,907) 605

Capex (1,568) (4,332) (2,000) (2,000)

Dividend paid (2,351) (2,447) (3,514) (4,452)

Profitability and efficiency ratios


ROAE (%) 20.5 21.5 23.5 25.3

ROACE (%) 26.8 29.1 33.0 35.7

Inventory Days 190 189 190 190

Debtors Days 21 15 20 20

Payable Days 82 90 90 90

Cash Conversion Cycle 128 114 120 120

Current Ratio 2.1 1.9 2.0 2.1

Gross Debt/EBITDA 0.1 0.1 0.1 0.1

Net Debt/Equity ‐ (0.1) ‐ (0.1)

Interest Coverage Ratio 19.7 27.7 24.4 27.1

Operating ratios


Total Asset Turnover 3.2 3.3 3.4 3.4

Fixed Asset Turnover 15.2 13.9 13.7 15.3

Equity Turnover 3.4 3.5 3.6 3.6

Valuation parameters


Adj. Diluted EPS (INR) 7.6 9.0 11.3 14.3

Y‐o‐Y growth (%) (17.4) 18.6 25.1 26.7

Adjusted Cash EPS (INR) 8.7 10.3 12.8 15.9

Diluted P/E (x) 70.5 59.4 47.5 37.5

P/B (x) 13.6 12.1 10.4 8.8

EV / Sales (x) 4.2 3.6 3.1 2.6

EV / EBITDA (x) 50.8 40.8 31.5 24.6

Dividend Yield (%) 0.4 0.4 0.6 0.8

Balance sheet (INR mn)

As on 31st March FY16 FY17 FY18E FY19E

Share capital 888 888 888 888

Reserves & Surplus 34,012 38,538 45,034 53,266

Shareholders' funds 34,900 39,425 45,922 54,153

Short term borrowings 1,131 113 113 113

Long term borrowings ‐ 1,017 1,017 1,017

Total Borrowings 1,131 1,131 1,131 1,131

Long Term Liabilities 1,090 1,090 1,090 1,090

Def. Tax Liability (net) (235) (235) (235) (235)

Sources of funds 36,885 41,411 47,907 56,139

Gross Block 14,392 18,392 20,392 22,392

Net Block 7,702 10,597 11,278 11,824

Capital work in progress 1,068 1,400 1,400 1,400

Intangible Assets 187 187 187 187

Total Fixed Assets 8,957 12,184 12,865 13,411

Non current investments 30 30 30 30

Cash and Equivalents 1,317 5,255 3,349 3,953

Inventories 44,535 48,825 56,921 66,703

Sundry Debtors 1,925 2,062 2,413 2,848

Loans & Advances 6,613 5,334 8,322 9,820

Other Current Assets 38 38 38 38

Current Assets (ex cash) 53,111 56,259 67,693 79,409

Trade payable 17,462 23,250 26,962 31,596

Other Current Liab 9,067 9,067 9,067 9,067

Total Current Liab 26,530 32,317 36,030 40,664

Net Curr Assets‐ex cash 26,581 23,941 31,663 38,745

Uses of funds 36,885 41,411 47,907 56,139

BVPS (INR) 39.3 44.4 51.7 61.0

Free cash flow (INR mn)


Reported Profit 6,745 6,973 10,010 12,683

Add: Depreciation 982 1,105 1,319 1,455

Interest (Net of Tax) 330 271 405 471

Others (536) 1,151 151 177

Less: Changes in WC 1,596 (2,640) 7,722 7,082

Operating cash flow 5,925 12,140 4,163 7,705

Less: Capex 1,568 4,332 2,000 2,000

Free Cash Flow 4,358 7,808 2,163 5,705


Retail

Top 10 holdings

Perc. Holding Perc. Holding

Jhunjhunwala Rakesh 6.9 Matthews International Capital 3.3

Life Insurance Corp Of India 2.1 Dendana Investments Mauritius 1.8

Jhunjhunwala Rekha Rakesh 1.6 Franklin Resources 1.3

Morgan Stanley 1.3 Blackrock Fund Advisors 1.2

Vanguard Group Inc 1.1 SBI Funds Management 1.0

*as per last available data

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

22 Dec 2016 Valiant Mauritius Partners Offshore Ltd Sell 6320937 317.00

22 Dec 2016 Valiant Mauritius Partners Ltd Sell 5010379 317.00

22 Dec 2016 Morgan Stanley Mauritius Company Ltd Buy 11331316 317.00

*in last one year

Additional Data

Directors Data Mr. Bhaskar Bhat Managing Director Mr. T.K.Balaji Non‐Executive, Independent Director

Ms. Vinita Bali Non‐Executive, Independent Director Ms. Hema Ravichandar Non‐Executive, Independent Director

Mrs. Ireena Vittal Non‐Executive, Independent Director Prof. Das Narayandas Non‐Executive, Independent Director

N N Tata Director Harish Bhat Director

Mr T K Arun Director Mr. Ashwani Puri Director

Auditors ‐ Deloitte Haskins & Sells

*as per last annual report


Company Absolute

reco Relative

reco Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Aditya Birla Fashion and Retail Ltd BUY SO L Future Retail HOLD SU H

Jubilant Foodworks HOLD SU M Shoppers Stop BUY SP L

Titan Company BUY SO L Wonderla Holidays BUY SP M

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Retail

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91‐22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research

[email protected]

Coverage group(s) of stocks by primary analyst(s): Retail

Aditya Birla Fashion and Retail Ltd, Future Retail, Jubilant Foodworks, Shoppers Stop, Titan Company, Wonderla Holidays

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 161 67 11 240* 1stocks under review

Market Cap (INR) 156 62 11

Date Company Title Price (INR) Recos

Recent Research

29‐May‐17 Jubilant Foodworks

Tough quarter; surgery underway with new CEO in place; Result Update

940 Hold

25‐May‐17 Wonderla Holidays

Hyderabad park’s scale up heartening; GST key monitorable; Result Update

363 Buy

15‐May‐17 Aditya Birla Fashion and

Retail

Transparency improves, Pantaloons’ SSG to recover; Result Update

170 Buy

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12‐month period

Hold appreciate up to 15% over a 12‐month period

Reduce depreciate more than 5% over a 12‐month period

Rating Expected to

One year price chart

200

280

360

440

520

600

Jul‐16

Aug‐16

Aug‐16

Sep‐16

Oct‐16

Oct‐16

Nov‐16

Dec‐16

Jan‐17

Jan‐17

Feb‐17

Mar‐17

Mar‐17

Apr‐17

May‐17

May‐17

Jun‐17

(INR)

Titan Company


Titan Company

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Retail

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Titan Company

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