Titan+Industries 310111

8/6/2019 Titan+Industries 310111

http://slidepdf.com/reader/full/titanindustries-310111 1/11

Please refer to important disclosures at the end of this report 1

Y/E March ( ` cr) 3QFY11 3QFY10 % yoy Angel est % diff

Sales 1,955 1,334 47 2,001 (2)

EBITDA 195 107 82 200 (2)

EBITDA % 10 8 10.0

PAT 138 75 82 145 (5)

Source: Company, Angel Research

For 3QFY2011, Titan Industries (Titan) reported stellar performance, which was inline with our expectations. The company reported top-line growth of 47% yoy to `

1,955cr, backed by robust revenue performance by the jewellery and watchessegments, which grew by 50% yoy and 35% yoy, respectively. For the quarter,EBITDA and PAT registered yoy growth of 82% each to ` 195cr ( ` 107cr) and ` 138cr ( ` 75cr), respectively. Operating margins stood at 10% (8%) during thequarter. At current valuations, we believe the stock is fairly valued. Hence, wecontinue to maintain our Neutral view on the stock.

Healthy growth in jewellery and watches segments improves performance: Duringthe quarter, Titan’s jewellery segment witnessed stellar growth of 50% yoy inrevenue to ` 1,579cr ( ` 1,055cr) on the back of higher gold prices, higher offtakeof studded jewellery and overall strong volume growth ( ~ 20%). The jewellery segment also witnessed a ~200bp yoy surge in PBIT margin to 9%. The watchessegment’s revenue witnessed 35% yoy growth to ` 325cr ( ` 241cr) on improved

sales of high-margin medium/high-end watches. PBIT margin of the watchessegment improved by 330bp yoy to 18% (14.7%). Strong sales were driven by buoyant consumer sentiment and discretionary spending. Revenue of thecompany’s other businesses (eyeware and precision engineering) grew by 64%yoy and managed to curtail loss by 15% to ` 5cr on PBIT level as compared to lossof ` 6cr in 3QFY2010.

Outlook and valuation: Although we remain positive on Titan’s growth prospects,we believe at 28.2x FY2012E earnings it discounts the same fairly well. Hence,we maintain our Neutral rating on the stock.

Key financials (Consolidated)Y/E March ( ` cr) FY2009 FY2010 FY2011E FY2012E

Net sales 3,833 4,678 6,274 7,842% chg 27.9 22.1 34.1 25.0Net profit 164 251 467 546% chg 13.3 53.1 86.0 16.9EBITDA (%) 7.9 8.5 9.5 9.0EPS (̀ ) 36.9 56.5 105.2 122.9

P/E (x) 93.8 61.3 32.9 28.2P/BV (x) 27.6 21.0 14.1 10.2RoE (%) 32.7 38.9 51.2 41.9RoCE (%) 36.7 39.1 49.0 44.1EV/Sales (x) 4.0 3.3 2.5 1.9EV/EBITDA (x) 51.0 39.0 26.0 21.6


NEUTRALCMP ` 3,593Target Price - Investment Period -

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 53.4

MF / Banks / Indian Fls 8.6

FII / NRIs / OCBs 10.4

Indian Public / Others 27.6

Abs. (%) 3m 1yr 3yr

Sensex (8.5) 12.4 3.8

Titan 1.1 139.7 210.3

Nifty 5,506

Reuters Code TITN.BO

TTAN@IN

Face Value ( `

) 10BSE Sensex 18,328

52 Week High / Low 4,244/1,460

Avg. Daily Volume 44796

Beta 0.9

Retail

Market Cap ( ` cr) 15,949

Sageraj Bariya+91-22-3935 7800 ext. [email protected]

Titan Industries

Performance Highlights

3QFY2011 Result Update | RetailJanuary 31, 2011



Titan Industries | 3QFY2011 Result Update

January 31, 2011 2

Exhibit 1: Quarterly performanceY/E March ( ` cr) 3QFY11 3QFY10 % YoY 9MFY11 9MFY10 % YoY

Total Revenue 1,955 1,334 47 4,744 3,369 41

Raw material 1,475 1,017 3,510 2,466as % of sales 75 76 74 73

Staff cost 85 68 245 195

as % of sales 4 5 5 6

SGA 89 60 214 157


Other Exp 110 81 294 252


Total Exp 1,760 1,226 4,264 3,069

as % of sales 90 92 90 91

EBITDA 195 107 82 480 301 60

EBITDA % 10.0 8.1 10.1 8.9

Depreciation 9 9 25 27

EBIT 187 98 455 274

EBIT % 10 7 10 8

Interest 2 3 7 16

Other Income 15 3 31 7

PBT 200 98 479 265

Total Tax 62 23 62 60

Tax rate 31 23 13 23

Reported PAT 138 75 82 417 205 104

Equity 44 44 44 44EPS 31.0 17.0 93.9 46.1


Jewellery segment witnesses growth, sales up 47%: During the quarter, Titan’sjewellery segment witnessed a 47% yoy increase in revenue on the back of highervolume offtake (up ~20%) and strong gold prices ( ` 2,000/gram). PBIT marginalso improved by 200bp yoy to 9% during 3QFY2011.




January 31, 2011 4

Exhibit 4: Segment-wise performance(` cr) 3QFY11 3QFY10 % YoY 9mFY11 9mFY10 % YoY

Revenues

Watches & Clocks 325 241 35 938 745 26Jewellery 1,579 1,055 50 3,654 2,513 45

Others (Corporate) 66 40 64 176 110 59

Total 1,970 1,336 47 4,767 3,368 42

PBIT

Watches & Clocks 59 35 65 177 123 44

Jewellery 142 74 92 310 183 69

Others (Corporate) (5) (6) (15) (8) (26) (69)

Total 195 104 89 479 280 71

PBIT Margin (%)

Watches & Clocks 18.0 14.7 18.8 16.5

Jewellery 9.0 7.0 8.5 7.3

Others (Corporate) (7.8) (15.0) (4.6) (23.5)

Overall 9.9 7.8 10.0 8.3





January 31, 2011 5

Investment arguments

Organised national player in the watch and jewellery segments

Titan Watches enjoys more than 65% market share in the organised watchsegment and 41% market share in the organised jewellery retailing segment.Titan's leadership position enables it to bargain hard with its vendors for bulkdiscounts, resulting in lower cost structure as compared to other regional players.

We estimate this bargaining power of Titan, coupled with its pan-India presence,will enable it to expand its EBITDA margin to 9% in FY2012E from 8.5% in FY2010and PAT margin to 7% in FY2012E from 5.4% in FY2010.

Easily scalable franchisee model

Titan operates 85–90% of its stores through the franchisee model, which providesscalability to its business. The company’s strong positioning in the respectivesegments has aided it to attract and scale up its business through the franchiseemodel. The company has also built a strong retailing network (nearly 500 ownstores besides dealers/franchisee arrangements), which is unmatched in the areaof specialty retailing. On the back of its further expansion plans and strongdemand outlook, we estimate Titan's top line, EBITDA and adjusted PAT to witnessCAGR of 30%, 34% and 41% over FY2010–12E, respectively.

Robust return ratios

Over the years, Titan has consistently posted robust RoE and RoCE, which havealso been the highest in the industry. The company has consistently delivered RoE

of 35% and above, and we estimate it to maintain RoE of 42.8% and 38.7% inFY2011E and FY2012E, respectively, on account of high asset-turnover ratio.Titan has a history of operating at a leverage below 1, which has given it highRoCE. We estimate Titan to deliver RoCE of 49% and 44% in FY2011E andFY2012E, respectively.

Outlook and valuation

Considering the improving volume trend in the jewellery and watches segmentscoupled with the company’s expansion plans, we expect Titan to witness bettertimes going ahead. Although we remain positive on the company’s growth

prospects, we believe at 28.2x FY2012E earnings it discounts the same fairly well.

Hence, we continue to maintain our Neutral rating on the stock.




January 31, 2011 6

Exhibit 5: One-year forward P/E band

Source: C-line, Angel Research

-500

1,0001,5002,0002,5003,0003,500

4,0004,500

M a y - 0

5

S e p - 0

5

J a n - 0

6

M a y - 0

6

S e p - 0

6

J a n - 0

7

M a y - 0

7

S e p - 0

7

J a n - 0

8

M a y - 0

8

S e p - 0

8

J a n - 0

9

M a y - 0

9

S e p - 0

9

J a n - 1

0

M a y - 1

0

S e p - 1

0

J a n - 1

1

( ` )

Price 12x 20x 28x 36x




January 31, 2011 7

Profit & Loss StatementY/E March ( ` cr) FY07 FY08 FY09 FY10 FY11E FY12E

Total operating income 2,091 2,997 3,833 4,678 6,274 7,842

% chg 11.9 43.3 27.9 22.1 34.1 25.0

Total Expenditure 1,900 2,757 3,529 4,281 5,679 7,135

Net Raw Materials 1,369 2,129 2,779 3,443 4,448 5,587

Other Mfg costs 362 431 514 560 851 1,063

Personnel 170 197 236 278 380 484

Other - - - - - -

EBITDA 191 240 304 397 595 707

% chg 30.0 25.9 26.6 30.5 49.9 19.0

(% of Net Sales) 9.1 8.0 7.9 8.5 9.5 9.0

Depreciation& Amortisation 26 33 42 61 34 47

EBIT 165 207 262 336 561 660% chg 44.2 25.5 26.6 28.5 66.8 17.8

(% of Net Sales) 7.9 6.9 6.8 7.2 8.9 8.4

Interest & other Charges 21 21 29 25 10 12

Other Income 6 3 5 12 33 33

(% of PBT) 4 2 2 4 6 5

Recurring PBT 149 189 238 323 584 682

% chg 86.2 26.6 25.8 35.5 80.9 16.9

Extraordinary Income/(Exp.) - - 47 24

PBT (reported) 149 189 285 347 584 682

Tax 38 45 74 72 117 136

(% of PBT) 25.2 23.6 26.0 20.7 20.0 20.0

PAT (reported) 112 145 211 275 467 546

ADJ. PAT 112 145 164 251 467 546

% chg 115.8 29.5 13.3 53.1 86.0 16.9

(% of Net Sales) 5.3 4.8 4.3 5.4 7.4 7.0

Basic EPS (̀ ) 25 33 37 57 105 123

Fully Diluted EPS (̀ ) 25 33 37 57 105 123

% chg 1,692.1 29.5 13.3 53.1 86.0 16.9




January 31, 2011 8

Balance SheetY/E March ( ` cr) FY07 FY08 FY09 FY10 FY11E FY12E

SOURCES OF FUNDS

Equity Share Capital 44 44 44 44 44 44

Preference Capital - - - - - -

Reserves& Surplus 293 401 513 687 1,050 1,465

Shareholders Funds 337 446 558 731 1,094 1,510

Total Loans 248 210 167 220 170 120

Deferred Tax Liability 18 25 19 26 47 55

Total Liabilities 603 681 743 977 1,311 1,684

APPLICATION OF FUNDS

Gross Block 526 573 606 677 761 857

Less: Acc. Depreciation 270 295 326 387 421 468

Net Block 255 278 280 290 340 389Capital Work-in-Progress 16 10 20 22 25 30

Goodwill - - - - - -

Investments 32 2 2 2 2 2

Current Assets 891 1,303 1,482 1,817 2,547 3,288

Cash 51 55 56 116 113 227

Loans & Advances 64 105 115 141 254 317

Other 777 1,143 1,311 1,560 2,180 2,744

Current liabilities 596 913 1,040 1,154 1,603 2,024

Net Current Assets 295 390 442 663 944 1,264

Mis. Exp. not written off 4 1 - - - -Total Assets 603 681 743 977 1,311 1,684




January 31, 2011 9

Cash Flow StatementY/E March ( ` cr) FY07 FY08 FY09 FY10 FY11E FY12E

Profit before tax 149 189 285 347 584 682

Depreciation 26 33 42 61 34 47

Change in Working Capital (310) (367) (168) (249) (621) (563)

Less: Other income 6 3 5 12 33 33

Direct taxes paid 38 45 74 72 117 136

Cash Flow from Operations (178) (192) 80 75 (153) (4)

(Inc)./ Dec in Fixed Assets (111) (49) (32) (52) (131) (104)

(Inc)./ Dec in Investments (4) 29 1 - - -

(Inc)/ Dec in loans and advances 74 (41) (10) (26) (113) (63)

Other income 6 3 5 12 33 33

Cash Flow from Investing (34) (58) (36) (66) (211) (134)

Issue of Equity 2 - - - - -Inc./(Dec.) in loans (22) (37) (44) 53 (50) (50)

Dividend Paid (Incl. Tax) (22) (36) (44) (67) (89) (111)

Others 267 327 45 64 499 413

Cash Flow from Financing 225 254 (43) 51 360 252

Inc./(Dec.) in Cash 12 4 1 60 (3) 114

Opening Cash balances 39 51 55 56 116 113

Closing Cash balances 51 55 56 116 113 227




January 31, 2011 10

Key RatiosY/E March FY07 FY08 FY09 FY10 FY11E FY12E

Valuation Ratio (x)

P/E (on FDEPS) 137.7 106.4 93.8 61.3 32.9 28.2

P/CEPS 111.7 86.4 74.6 49.4 30.7 26.0

P/BV 45.6 34.5 27.6 21.0 14.1 10.2

Dividend yield (%) 0.1 0.2 0.3 0.4 0.6 0.7

EV/Sales 7.5 5.2 4.0 3.3 2.5 1.9

EV/EBITDA 81.7 64.8 51.0 39.0 26.0 21.6

EV / Total Assets 25.8 22.8 20.8 15.9 11.8 9.1

Per Share Data ( ` )

EPS (Basic) 25.2 32.6 36.9 56.5 105.2 122.9

EPS (fully diluted) 25.2 32.6 36.9 56.5 105.2 122.9

Cash EPS 31.0 40.1 46.5 70.2 112.8 133.5DPS 5.0 8.0 10.0 15.0 20.0 25.0

Book Value 75.9 100.4 125.7 164.7 246.5 340.1

Dupont Analysis

EBIT margin 7.9 6.9 6.8 7.2 8.9 8.4

Tax retention ratio 74.8 76.4 74.0 79.3 80.0 80.0

Asset turnover (x) 4.2 5.2 5.9 6.1 6.1 5.9

ROIC (Post-tax) 25.0 27.6 29.6 34.5 43.6 39.8

Cost of Debt (Post Tax) 6.1 6.9 11.3 10.4 4.1 6.3

Leverage (x) 0.7 0.4 0.3 0.2 0.1 (0.0)

Operating ROE 39.1 36.9 34.4 38.5 47.1 39.2

Returns (%)

ROCE (Pre-tax) 29.1 32.2 36.7 39.1 49.0 44.1

Angel ROIC (Pre-tax) 30.7 33.5 39.2 40.1 47.8 46.3

ROE 38.9 36.9 32.7 38.9 51.2 41.9

Turnover ratios (x)

Asset Turnover (Gross Block) 4.4 5.5 6.5 7.3 8.7 9.7

Inventory / Sales (days) 92 105 107 103 100 105

Receivables (days) 16 12 10 9 9 10

Payables (days) 92 100 101 94 89 93

Working capital cycle (ex-cash) (days) 42 35 34 36 40 43

Solvency ratios (x)

Net debt to equity 0.6 0.3 0.2 0.1 0.1 (0.1)

Net debt to EBITDA 1.0 0.6 0.4 0.3 0.1 (0.2)

Interest Coverage (EBIT / Interest) 7.8 9.9 9.1 13.2 56.1 57.4




January 31, 2011 11

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

DISCLAIMERThis document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investmentdecision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should makesuch investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companiesreferred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits andrisks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, makeinvestment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in thisdocument are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions andtrading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company'sfundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .

Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While

Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking orother advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or inthe past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or inconnection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may haveinvestment positions in the stocks recommended in this report.

Disclosure of Interest Statement Titan Industries1. Analyst ownership of the stock No2. Angel and its Group companies ownership of the stock No3. Angel and its Group companies' Directors ownership of the stock No4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Titan+Industries 310111

Documents

Transcript of Titan+Industries 310111