Titan

Tanishq stands to benefit from Hallmarking – Titan

Update on the Indian Equity Market:

On Wednesday, NIFTY closed 0.3% down at 17,076. Top gainers in NIFTY50 were ASIANPAINT (+3.1%), TATAMOTORS (+2.6%), and SBILIFE (+1.9%). The top losers were M&M (-3.0%), CIPLA (-2.7%), and TATASTEEL (-2.7%). The top gaining sectors were REALTY (+5.6%), CONSUMER DURABLES (+2.0%), and PSUBANK (+0.9%), while the top sectoral losers were METAL (-1.8%), IT (-1.3%), and FINANCIAL SERVICES (-0.2%).

Tanishq stands to benefit from Hallmarking – Titan

Edited excerpts of an interview with Mr. Ashok Sonthalia, Chief Financial Officer, Titan with CNBCTV18 on 1st Sep, 2021:

  • At the time when brokers can no longer sell digital gold, Tanishq has launched digital gold.
  • While explaining the rationale behind the idea, Mr. Sonthalia informed that digital gold was one of the ways consumers wanted to lock-in the gold price. So, the company decided to experiment with it.
  • Digital gold has been launched recently in some pockets, response of which is yet to be seen. Company hopes that digital gold provides another way to consumers who want to invest with Tanishq in gold. They can buy at appropriate time and convert it into physical form.
  • Smaller players are facing severe challenge due to Hallmarking and it has led to lot of supply chain challenges.
  • Titan has been preparing for gold hallmarking for long time, without expecting any extension from the government. The well advance preparation has helped Tanishq to be 100% hallmarked currently.
  • The whole Hallmarking Unique ID (HUID) process is creating some teething trouble, due to which supply chain has gotten elongated by 5-7 days. This leads to having more inventory to that extent. But other than that, Tanishq is going to be fine on hallmarking and the company believes that these teething issues will also be sorted out going forward.
  • Government has been flexible regarding hallmarking as it has given a lot of time to the industry. The rule was introduced in Jun-21, no penalties were imposed until the end of Aug-21, so that manufacturers, wholesalers, and retailers of gold jewelry get enough time to comply.
  • Hallmarking will be positive for industry as consumers will be confident of buying gold from anywhere.
  • According to Mr. Sonthalia, the earlier model of pure gold and low making charges will be challenged now. Tanishq is in a favorable position as it always had pure gold plus making charges.
  • Tanishq will gain from hallmarking as it will be challenging for unorganized and small player to correct and re align their model now.
  • Mr. Sonthalia commented that the recovery of Tanishq has been pretty good post the second wave of COVID-19. Everyone in the organised sector including Tanishq is doing well.
  • According to him, the shift from unorganised to organised was a slightly longer-term story, but some of the elements have given an impetus and to that extent, organised sector is gaining from the unorganised sector and Tanishq is also benefitting.
  • His comments on 2QFY22E:
    • Tanishq jewelry and eyewear are in the growth phase.
    • The stores are still not fully operational. They are running between 80%-90%.
    • While Physical stores are operating at a slightly less capacity, digital and omni have supplemented to some extent.
  • According to company guidance given earlier, Titan plans to open 35 stores in FY22E. 11 stores have already been opened.
  • Company is working on physical and digital sales point aggressively. In 1QFY22, the physical retail stores expansion plan got impacted due to second wave but it is confident of completing the target by Mar-22E.The focus and investment on digital and omni is also going in a big way.
  • Many time the enquiry and selection of jewelry starts digital or in video calls but ends in physical stores. So, stores are not going to lose their importance and Titan plans to be very aggressive there too.

 

Asset Multiplier Comments

  • We believe that Mandatory hallmarking will standardize the purity of gold jewelry. It will take the industry towards being more structured and even further push the ongoing shift of business and customers from the unorganised to the organised jewelry segment.
  • With re-opening of stores, increasing wedding sentiments and rising vaccination pace, jewelry demand is expected to improve further. Hallmarking will benefit Tanishq as it has competitive edge over other small players who are facing issues.

 

Consensus Estimate (Source: market screener website)

 

  • The closing price of Titan was ₹ 1,944/- as of 1-Sep-21. It traded at 94x/68x/57x the consensus EPS estimate of ₹ 20.4/28.4/33.8 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,737/- implies a PE multiple of 51x on FY24E EPS of ₹ 33.8/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

Green shoots visible as unlock begins – Titan

Update on the Indian Equity Market:

On Tuesday, Nifty closed in the green at 15,869 (+0.4%). Among the sectoral indices, Realty (+1.3%), PVT Bank (+1.1%), and Media (+2.0%) closed higher. Pharma (-0.9%), PSU Bank (-0.3%), and Metal (-0.1%) closed in the red. Asian Paints (+2.9%), HDFC Life (+1.8%), and Axis Bank (+1.7%) were the top gainers. Divis Labs (-1.6%), Adani ports (-1.6%), and Coal India (-1.4%) were among the top losers.

Excerpts of an interview of Mr Ajoy Chawla, CEO, Jewellery Division, Titan with CNBC-TV18 dated 14th June 2021:

  • Speaking about the shop openings, Mr Chawla said the company is focusing to reopen shops for the past 2 weeks.
  • The recovery is expected to be slow, but there are green shoots visible as the unlock begins in certain states.
  • Speaking about pent-up demand, he said the wedding demand is likely to come back in 2HFY22E. Wedding buying is complex and people do take time to buy.
  • The company is witnessing pent-up demand for small occasion buying like birthdays, and anniversaries.
  • The overall market share is in 5-6% mark from 4%, 2 years back.
  • The company is gaining market share as new customers are coming in. The recovery is better in the case of a new buyer where unlock has begun.
  • Independent jewellers are under stress financially. The trust factor and safety protocol are higher in organized players like Titan, which attracts more people.
  • The company is targeting 100% vaccination for all partners, front line, and store staff.
  • He said that few people have started buying on e-commerce channels on the digital play, which is surprising. However, the ticket size is smaller (below Rs 50,000).
  • Speaking about products, he said, the gold prices have again gone up. The biggest customer need will be lightweight jewellery as the budgets don’t increase in the same proportion. The company is working on lightweights products and will launch as markets open up.

Asset Multiplier comments:

  • We believe people will not postpone weddings beyond 1QFY22E as the future situation is uncertain. This might lead to higher jewelry buying from 2QFY22E.
  • Stress in the organized sector might help Titan to increase its market share by adding new first-time customers.

 Consensus Estimate: (Source: market screener and Investing.com website)

  • The closing price of Titan Ltd was ₹ 1,722 as of 15-June 2021.  It traded at 79x/62x the consensus Earnings per share estimate of ₹ 21.8/27.9 for FY22E/FY23E respectively.
  • The consensus average target price is ₹ 1,532/- which implies a PE multiple of 55x on FY23E EPS of 27.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Q4FY21 is expected to be normal – Titan

Update on the Indian Equity Market:
On Wednesday Nifty closed 1% higher at 13,601. Among the sectoral indices, Realty (+3.9%), Media (+3.3%), and IT (+2.4%) closed higher. None of the sectors closed lower. Wipro (+5.7%), Cipla (+3.7%), and Tata Steel (+3.40%) closed on a positive note. Hero Motors (-1.0%), Divis labs(-0.7%), and Titan (-0.5%) were among the top losers.

Excerpts from an interview of Mr. S Subramanian, CFO, Titan with CNBC-TV18 dated 22nd December 2020:

● Mr S. Subramanian said there is a strong space for growth in jewellery sector over the next 5-10 years.
● The company has established itself as the market leader and the balance sheet is stronger.
● On other businesses, he said wearables are now a very exciting opportunity. With focus of people on wellness the company is looking for substantial growth in that segment.
● On eyewear, he said the market is significantly underpenetrated and there is a lot of opportunity to grow.
● He expects the company to come out stronger post covid crisis and the focus will be on people.
● On guidance, he said the 4QFY21E is expected to be normal and the good news is vaccine coming.
● The footfalls are improving even in malls and he expects that the worst to be over.
● On weddings, he said that the spends on weddings are lower, it provides an opportunity for people to spend more on jewellery. The company is also witnessing an increase in ticket size spends.
● He said the devices which will track people’s well-being would become important and so (Digital fitness watches) in Watches is a very exciting area.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Titan was ₹ 1491 as of 23-December-2020. It traded at 149x/ 69x/ 56x the consensus Earnings per share estimate of ₹ 10/22/27 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Titan is ₹ 1068/- which implies a PE multiple of 40x on FY23E EPS of 27/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Tanishq sees better recovery in demand in smaller towns- TITAN

Update on the Indian Equity Market:
On Thursday, Nifty ended 0.8% higher at 11,834 led by IT and Pharma stocks. The top gainers for Nifty 50 were Wipro (+7.3%), Cipla (+5.0%), and TCS (+3.0%) while the losing stocks for the day GAIL (-3.1%), ONGC (-2.8%), and ITC (-1.4%). Top gaining sectors were IT (+3.2%), Pharma (+2.5%), and Bank (+1.0%) while losing sectors were Media (-0.5%) and FMCG (-0.1%).

Edited excerpts of an interview with Mr Arun Narayan, Vice President, Category, Marketing & Retail, Tanishq at Titan Company Limited.; dated 07th October 2020 from Retail Economic Times:

Almost all Tanishq stores are open across the country and the Company has seen a really encouraging response from consumers. There has been positivity because of the festivals from August onwards. The Company believes that as they head into Dussehra and Diwali, the sentiment should only improve.

In towns, where malls contribute to a larger part of their business, the recovery has been even slower but there has been a steady improvement month on month and that gives them the confidence as they head into Dussehra and Diwali. Consumers are waiting to bring in positivity into their lives after months of being restrained and locked down and that is going to play out over the next two months i.e., in October and November.

The Company saw a greater improvement in plain gold and studded jewellery. In August, there was a period when the Company saw more investment buyers and increased demand for gold coins. That was the time when gold rates were going up significantly for maybe two weeks. But now that gold rates have cooled down, they found that recovery is pretty much even across both plain gold as well as studded jewellery.

The management is fairly optimistic about this season for many reasons; one is deferred demand from wedding shoppers. Weddings have got deferred from quarter one of this year to November, December and some of them also to quarter four and they believe that those who have weddings in their families will be back to shop for jewellery. Second, many consumers buy every year during this auspicious period and the Company knows they will be back.
Consumers seem to have accepted that gold rates may remain range-bound or fluctuate, but there is a belief that at least till this festive season, they may not see a significant uptick.

The Company has more than 13,000 customers who bought jewellery through video calls.
One can buy jewellery from the comfort of their homes, sitting with their family, through video calls and can make a remote contactless payment. All the documentation and invoices can be emailed to the customers and they can get the latest catalogues on their phone or device. One can buy jewellery from their nearest Tanishq store from the comfort of their homes. It is a whole new experience for the Company & the consumers as well with the virtual try-on and video calling. The way consumers have adopted that across metros and smaller towns has been really fantastic.

Consensus Estimate: (Source: market screener website)
The closing price of Titan Company Ltd was ₹ 1,254/- as of 08-October-2020. It traded at 127.1x/ 60.0x/48.8x the consensus EPS estimate of ₹ 9.9/20.9/25.7 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 1,068/- implies a PE multiple of 41.5x on FY23E EPS of ₹ 25.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Investment in digital transformation paying off now – Titan

Update on the Indian Equity Market:
On Monday, Nifty ended 2.5% lower at 11,222 mirroring sell-off in global markets due to rising coronavirus cases across the globe. Domestic investors remained cautious due to the passage of a farm bill as well. Among the Nifty50, TCS (+0.8%), INFY (+0.5%), and KOTAKBANK (+0.3%) were the only stock gainers. INDUSINDBK (-8.6%), TATAMOTORS (-7.8%), and HINDALCO (-7.2%) were the top losers. None of the sectoral indices ended the day in the green, and REALTY (-6.0%), METAL (-5.6%), and MEDIA (-4.8%) were the top sectoral indices to end with losses.

Edited excerpts of an interview with Mr. S Subramaniam, CFO, Titan Company with CNBC-TV18 on 18th September 2020:
• As of now, plain gold jewelry, wedding jewelry, and gold coins are still very much in demand. The recovery from an overall revenue perspective has been fine. The month of September will not see high sales due to the extended inauspicious period.
• In terms of revenues, the company is at about a 90% level on a year-on-year basis. Around 85-90 percent of stores are open but for shorter timings due to localized lockdowns.
• As far as diamond jewelry is concerned, the ratio will remain low this year as discretionary expenses are not taking off as expected. The company hopes to return to normalcy by 4QFY21.
• The industry is facing some serious challenges due to Covid-19, especially the smaller jewelers. Titan is witnessing higher market share, due to a strong balance sheet and strong brands.
• The high investments in digital transformation over the past years are now paying off. Videoconferencing has become a big way of attracting and connecting with customers. Some of the customers may visit the store to complete the sale but a lot of sales are happening digitally. These are the big competitive advantages of Titan.
• The studded jewelry caters to people who are unlikely to face job losses due to the pandemic. Discretionary spending doesn’t depend just on the income levels but also on the general mood and sentiment. In the current situation, most people are avoiding going out. They are waiting for better times when they can feel safe going out to buy jewelry.
• The recovery has been good, slightly better than what the company had anticipated. There are some worrying signs such as the unpredictable timing of normalcy returning, the vaccine is available for all, vaccine doses, which are slightly dampening.
• The cost-cutting measures have been implemented since December 2019, before the outbreak of the virus. The companywide initiative been doing very well. The measures start from discounts to customers, to franchisee pay-outs and every aspect is being looked at. Similarly, every element of fixed cost is also being looked at, including employee cost. The savings from the measures are coming in and assuming next year to be a normal year, will see a bump up in margins.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of Titan Company was ₹ 1,117/- as of 21-September-2020. It traded at 111x/ 54x/ 45x the consensus earnings estimate of ₹ 10.1/ 20.7/ 24.9 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 1,062/- implies a PE multiple of 43x on FY23E EPS of ₹ 24.9/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

We are committed to reaching normalcy by 4QFY21: Titan MD

Update on the Indian Equity Market:

On Thursday, Nifty ended 2.1% lower at 9,902. The top gainers for Nifty 50 were IndusInd bank (+4.3%), Hero Motocorp (+0.8%) and Nestle India (+0.8%) while the losing stocks for the Infratel (-8.9%), ZEEL (-6.7%) and SBI (-5.6%). All the sectors ended in the red zone. The top losing sectors were PSU Bank (-3.9%), Metal (-2.8%) and Bank (-2.7%).

Edited excerpts of an interview with Mr CK Venkataraman, MD, Titan Company Ltd; dated 10th June 2020 from Retail Economic Times:

  • Titan stores have started opening from the first week of May and as of 9th June 2020 nearly 80% of their stores have opened and some of them had seen a four-week run. Titan is trying to get a sense of the trend and it seems that the trend is currently varying across different formats perhaps because there are underlying reasons for people to buy those products.
  • The company had started on a cost erosion programme at the end of CY19, without any idea that COVID is going to come the way and therefore it was a very good thing that Titan had reached a certain momentum and some of that showed up in quarter four of FY20 performance and that momentum will continue to carry that effort into FY21 as well.
  • The sales levels of FY21E are very uncertain. At the moment, Titan is not seeing any major impact on the gross margins of the various product categories despite pressures. The operating margin or the profit margin for the business will be determined by the final sale level the Company will reach for the year which is very difficult to determine.
  • Titan needs to work on creating a desire for products in the customers’ mind even when they are sitting at home. It would involve either getting them to come to the stores or enabling them to buy from home.
  • Marriages are now going to be less grand and the families are going to have more money in their hands which they have not spent on five-star hotels or catering for 2,000 people at lunch and dinner and so on. The industry as well Titan can influence them to flow into jewellery purchase. Thus, Titan bets there to be a higher demand for jewellery.
  • Demand is going to be sluggish but the basic need of people to socialise is not going to go. He is sure that in three-four months from now, people will start doing that and their products will become part of that socialising.
  • Innovation will help the Company in CY2021E.

Consensus Estimate: (Source: market screener and investing websites)

  • The closing price of Titan Company Ltd was ₹ 951/- as of 11-June-2020. It traded at 74.9x/ 44.0x the consensus EPS estimate of ₹ 12.7/21.6 for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 1036/- implies a PE multiple of 48.0x on FY22E EPS of ₹ 21.6/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Demand intact amid high gold prices and Coronavirus: Mr S. Subramaniam,Titan

Update on the Indian Equity Market:

Amid rising concerns over Coronavirus becoming a pandemic, major global indices witnessed heavy selling with markets falling in the range of 2.5- 4.5%. India was no exception to this as the Nifty fell 420 points (-3.6%) to close at 11,202. FIIs continued to be net sellers as they sold Rs 30,648mn on Friday. The depth of weakness in Friday’s market was such that 39 out of 50 stocks in the index fell more than 2% with VEDL (-12.8%), TATAMOTORS (-10.9%) and M&M (-8.0%) being the biggest losers. Only two stocks in the index, MARUTI (0.2%) and IOC (0.1%) survived the day on the positive side. All the sectoral indices fell in the range of -2.4% (FMCG) to -7.3% (METAL) with -5.3% (IT) and MEDIA (-4.9%) being the other two biggest losers.

Excerpts from an interview with Mr S. Subramaniam, CFO- Titan, published in CNBC TV-18 on 27th February 2020.

  • Gold prices in India have hit record high levels as investors tried to shift from risky asset classes to safe assets. Mr Subramaniam said that he is not sure if there is any major impact on consumption due to the increase in gold prices and Coronavirus.
  • About Coronavirus, he said that the impact on the business due to the virus is extremely remote or small. Although the company relies on some supplies for watches from China, as of now the stock situation is not deteriorating.
  • The increase in the price of gold has not affected the demand for the company. He cited two possible reasons for this; first, people are now looking at gold as something which will be going up over time and second, there’s wedding season going on in the country.
  • In January, he gave guidance for the revenue growth around 11-13% for the quarter. He reiterated the target again in the interview as he is confident of achieving the target.
  • He talked about the demand situation in the current market. It is quite expensive to buy gold at these elevated prices. At the same time, because of issues like Coronavirus and microeconomic global situation, people may start looking at gold as an investment. As a result, there may be a pick-up in demand on the back of ETF gold coins rather than the jewellery side. Jewellery is still driven by festivals and customary requirements.
  • In the eyewear and watch business, the demand situation was not bad in January. It is still low but not as bad as it was in December. He expects a reasonable quarter for both these segments. He stated that the demand situation is possibly at the bottom and the company might witness improvement in the future.

Consensus Estimate: (Source: market screener website and investing.com websites)

  • The closing price of Titan was ₹ 1,254/- as of 28-February-2020.  It traded at 70x/ 55x/ 46x the consensus earnings estimate of ₹ 18.0/ 23.0/ 27.5 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price for Titan is ₹ 1276/- which implies a PE multiple of 46x on FY22E EPS of ₹ 27.5/- .

Gold should be viewed as an investment – S Subramaniam, Titan

Update on the Indian Equity Market:

On Thursday, the Monetary Policy Committee (MPC) of RBI decided to keep the policy repo rate unchanged and persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target.

The broad market index, Nifty50 ended the day marginally high. PSU Bank (+2.6%), Media (+1.6%) and Pharma (+1.3%) were the top gainers while FMCG (-0.6%), IT (-0.4%) and Realty (-0.3%) were the sectoral losers for the day. Amongst the stocks, Eicher Motors (5.4%), IndusInd Bank (+4.6%) and Zee Entertainment Enterprises (+3.9%) were the biggest gainers. Tata Motors (-2.9%), Cipla (-2%) and Titan (-1.6%) ended the day in the red.

Gold should be viewed as an investment – S Subramaniam, Titan

Excerpts of an interview with S Subramaniam, CFO, Titan. The interview was published in Livemint on February 6, 2020:

  • Titan recently released the 3QFY20 result. The numbers were largely in line with the street estimates and margins were better than expected.
  • Although the company is definitely gaining market share, it has been a bumpy ride. The months of October and November were pretty good but December was tough, so the market is a little shaky.
  • The CFO is hopeful of doing well in the coming quarter as well, the initial guidance of 11-13 percent growth in the jewelry segment has been maintained.
  • Growth in the jewelry business was guided at 2.5x by 2023, which may be at risk, considering that kind of growth is not happening. People looking at gold as an investment in addition to it being a jewelry item would help achieve that kind of growth.
  • The industry has been in pretty bad shape for a variety of reasons. The month of December saw a surge in the gold prices, which did not help. A lot of the jewelers are undergoing financial crises with a pretty bad liquidity situation. Those with adequate funds can possibly do better. Else this pain will continue industry-wide for some more time.
  • Moving to other business segments, the watch segment, World of Titan has witnessed 11 percent growth in the quarter. Although the growth was phenomenal, opportunity was missed on the trade channel because of stocking and in the e-commerce channel. 10 percent of the revenues come from the e-commerce segment which has been slowing down.
  • Margins would be an area of concern for the watch segment. It is expected to perform better including in the next quarter (Q4).
  • The expectation is that margin-wise, the company performance would be better in FY20 than FY19.
  • Growth has been challenging for the eyewear segment. The profitability challenges continue, which need to be addressed.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of Titan was ₹ 1259/- as on 6-February 2020. It traded at 69.6x/ 54.5x/ 45.6x the consensus earnings estimate of ₹ 18.1/ 23.1/ 27.6 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price of ₹ 1204 /- implies a PE multiple of 44x on FY22E EPS of ₹ 27.6 /-

 

Demand has been quite decent: Subbu Subramaniam, Chief Financial Officer, Titan Co. Ltd

Update on the Indian Equity Market:

On Monday, NIFTY50 closed -0.13% higher at 11,936. NIFTY50 gainers includes BPCL (+2.2%), Axis Bank (+2.1%) and Adani Ports (+2.0%). NIFTY50 losers includes TCS (-3.0%), HCL tech (-1.6%) and Cipla (-1.3%). Auto (+0.8%), Metal (+0.5%) and Financial Services (+0.4%) were the top gainers and Realty (-1.6), IT (-0.9%), and Media (-0.8%) were the top losing sectors.

Excerpts from an interview with Mr. Subbu Subramaniam, CFO, Titan Co. The interview was published in Livemint dated 05th December 2019.

  • Titan has embarked on Omni channel in five flagship stores in Bengaluru. They are planning to adopt Omni channel across all their divisions. Their websites are done; their e-commerce platforms are quite robust now.
  • The Omni part has just about started; they are starting with the watch division. They have started it with Bengaluru, but this could get rolled out fairly quickly.
  • Even as they start rolling out for the watch division across the country, they may  start in a couple of months in Tanishq, as well in jewelry division.
  • So, Omni is going to be the way they will all do business. People can look at a product anywhere, whether it is online or offline, and choose to take the goods from anywhere. So, that is the strategy, it is more of an enabler.
  • Jewelry margins depend to a large degree on top-line growth, because that is where economies of scale work and the operating leverage kick in. On a gross margin basis, they are generally in the same ballpark as they have been.
  • As they stand right in the middle of the quarter, he restrained from giving any number at this point in time, but EBIT should generally, be in the ballpark of growth – margins that we have been having in the financial year.
  • Demand has been quite decent. November itself has not been bad. Despite Diwali being a little early, demand has been generally fine. Of course, they also had more promotions, which was required under the circumstances. The wedding season has been quite decent.

Consensus Estimate (Source: market screener, Investing.com website)

  • The closing price of Titan Co. was ₹ 1,175/- as of 09-December-19. It trades at 68x/ 49x/ 41x the Consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 18.7/ 23.9/ 29.0 respectively.
  • Consensus target price of ₹ 1,216/- implies a PE multiple of 42x on FY22E EPS of ₹ 29/-

“Titan’s market share gain story intact”- S. Subramaniam, chief financial officer, Titan Co. Ltd.

Update on the Indian Equity Market:

On Thursday, NIFTY closed 0.42% higher at 12,016. Infratel (+3.5%), Sun pharma (+3.4%) and IndusInd Bank (+2.8%) were the top NIFTY50 gainers. UPL (-7.8%), Yes Bank (-3.6%) and GAIL (-3.5%) were the top NIFTY50 losers. Among the sectors, NIFTY METAL (+1.1%), NIFTY REALTY (0.9%) were the sectoral indices that closed positive. NIFTY PSU banks (-1.5%) and NIFTY AUTO (-0.2%) were the worst performing sectors.

Excerpts from an interview with S. Subramaniam, chief financial officer, Titan Co. Ltd broadcasted on CNBC on 7th November 2019.

  • June onwards it has been really tight and the entire industry has been in turmoil. As far as are we are concerned, our market share gains story is intact but it is unfortunately in a very declining jewellery market.
  • Even from Dussehra to Diwali, which is the festive season, for 33 days they have grown 10%.
  • They are in tough times. Gold prices have been high but, importantly, consumer sentiment has not been encouraging. consumers are trying to save money. They don’t want to invest too much.
  • Gold coins sales being little higher, which means that people who are investing in the category also are looking at it more from the savings perspective rather than actually spending money on jewellery as adornment.
  • They are now looking at 11-13% growth in second half. They also have a higher base but 10% in the festive season was not bad at all under the circumstances.
  • Typically when gold prices do go up there is pent up demand when it comes to the wedding part of the segment, people do have to finally end up investing. So, to some extent we could see a shift on a month-on-month or quarter-on-quarter basis.
  • Even the millennials when they get married, they have exactly the set of jewellery that otherwise would have been bought and if anything the design quotient is much higher these days.
  • They have seen east do quite well, they have seen south do relatively quite well, but the region that gets impacted the most has been west.
  • FY20 is expected to be a fairly bad year. They are not going to meet their 20% target and they have given that guidance also now. Their goal for the next six months is 11-13%.
  • One of the biggest drivers in the last three years has been the gold exchange programme. Today it accounts for almost 40% of the revenues. They need more growth drivers like that.
  • They do not want to have any quarter where they have less than 10% margin. They are well within their own internal plans as far as the margin for the watch business is concerned.
  • They are trying to even it out better than having 18% in the first half and then going down to 7-8% in the second half. So, in FY20, we should look at second half to be more than 10%. So, it is a conscious decision and, therefore, it is not really a fall.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of Titan was ₹ 1,166/- as of 7th November 2019. It traded at 63x/ 48x/ 39x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 18.6/ 24.4/ 29.7 respectively.
  • Consensus target price of ₹ 1,246/- implies a PE multiple of 42x on FY22E EPS of ₹ 29.7/-.