TITAN INDS.
RAJESH DESAI
TITAN INDS.
I am starting a new thread for each company I am tracking and shall post all updates in the respective threads. All members are requested to also post reports, views and updates in these threads.
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products, acts of God and their pricing, product demand and supply constraints.
RIO palette inspired by sports-wear, modern aspirations
Titan Eye Plus has announced the launch of `RIO’ – a trendy and fashionable collection of eyewear aimed at the youth. The collection has been designed to leverage the latest market trends and entice the modern consumer for whom eyewear is more than a necessity. Naturally, the colour palette takes inspiration from sports-wear and sports-accessories. This premium brand is priced between INR 2000 and INR 3500. As per Ravi Kant, COO, Titan Eyewear Division, bold colors, sleek frames and detailing of the brand will ensure a new style statement.
Eye+ gaining traction, robust sale growth expected
Others (includes Eye+ and precision engineering) grew strongly by 44% Y‐o‐Y to INR 968 mn Q1FY12. We believe Eye+ is the major contributor to the growth with precision engineering remaining stable. We expect the growth momentum to continue due to retail expansion (from the current 175 stores to 225 in FY12E) and launch of newer designs. Titan Eye Plus stores also sell in-house brands of Titan, Eye+ and Dash along with frames and sunglasses from Esprit, Tommy Hilfiger, Hugo Boss, D&G and Versace.
Outlook: Adds to sparkle; ‘BUY’
Increasing brand consciousness in India, indicating a shift from unbranded jewellery, watches and eyewear to branded ones, and rising gold prices assure a sustained sparkle for Titan which remains one of the best plays in the consumer universe. At CMP, the stock is trading at 34.4x and 26.6x of FY12E and FY13E EPS respectively. We maintain ‘BUY/Sector Outperformer’ recommendation/rating on the stock.
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EQUITY BULL
RAJESH DESAI
| Golden Harvest indeed! | |
 Titan Industries surely has its ears to the ground and hands on the pulse of the people. With gold prices zooming to unheard of heights, making it out of reach for most of us, the company has come with a unique scheme – Golden Harvest. As per this scheme, you can choose two schemes – 11months +1 and 18 months scheme. The basic idea is like a monthky savings scheme,e wherein every month you either put in a fixed amount (11+1 scheme) or flexible amounts (18 months scheme) and the end of the tenure, Titan will add one month as bonus and you can buy whatever you have saved. From installments starting from Rs.500 per month, you are welcome to deposit a bigger amount too, as long as the amount is in multiples of Rs.500. At the end, with the money which you have ‘saved’ you can buy 18 Karat diamond studded jewellery or a 22 Karat pure gold jewellery from Tanishq. This is extremely good for those who want to plan their jewellery buying in advance. But the drawback is that you have no option but to buy from Tanishq. And here, surely the making charges could be twice of what your local goldsmith offers. So that is the risk which one might have to face under this scheme. Simply put, the return, based on the one month ‘special bonus’ works out to effectively around 8.33%. All in all, on the face of it , sounds extremely enticing but sift through the layers and you can understand how smartly this scheme has been designed. Now this is what we call necessity is the mother of invention. |
EQUITY BULL
RAJESH DESAI
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Titan Industries loses its sheen on surging gold prices Titan Industries declined 3.52% to Rs 195.70 at 11:44 IST on BSE, on concerns high and rising gold prices may impact sales of gold jewellery.
On BSE, 3.79 lakh shares were traded in the counter as against an average daily volume of 5.51 lakh shares in the past one quarter. The stock hit a high of Rs 200 and a low of Rs 193.10 so far during the day. The stock had hit a record high of Rs 238.25 on 14 June 2011 and a 52-week low of Rs 142 on 18 August 2010. The stock has fallen 14.22% in 12 trading sessions from a recent high of Rs 228.15 on 2 August 2011. The large-cap stock outperformed the market over the past one month till 18 August 2011, declining 10.87% compared with the Sensex's 11.01% fall. The scrip had also outperformed the market in past one quarter, falling 0.72% as against 8.94% decline in the Sensex. The company has an equity capital of Rs 88.78 crore. Face value per share is Rs 1. Titan Industries reportedly expects some softness in demand for its jewelry products in the current quarter and the next because of high gold prices. Gold prices have touched record levels as concerns about the health of the global economy continue to drive investors to the safety of the yellow metal. Titan Industries retails branded gold jewellery under the brand name 'Tanishq'. Titan Industries' net profit soared 76.4% to Rs 143.36 crore on 61.3% growth in net sales to Rs 2020.51 crore in Q1 June 2011 over Q1 June 2010. Titan Industries sells watches under its premium brand Titan and economy brand Sonata. |
EQUITY BULL
RAJESH DESAI
Sales to equal last year inspite of gold price: Titan Ind
Even though Titan Industries reported outstanding numbers for the first quarter for FY12, Bhaskar Bhat, Managing Director of the company believes that they will see a fall in sales for the current quarter.
“April, May and June had a strong wedding season, thereafter which the reasons for buying gold have diminished. This, along with the high price of gold has reduced demand” he told CNBC-TV18 in an exclusive interview. However, he expects the demand to pick up during the festival season.
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Bhat goes on to say that he expects jewellery sales to be as good as they were last year. “We see a 30% growth in both topline and bottomline for FY12” he added.
Below is an edited transcript of his interview with Latha Venkatesh and Gautam Broker. Also watch the accompanying video.
Q: You reported sterling numbers for the first quarter, but since then, have sales fallen given the high price of gold?
A: Yes, but it is not entirely because of gold prices. April, May and June had a strong wedding season, thereafter which the reasons for buying anything, leave alone gold jewellery have diminished. This, along with the high price of gold has reduced the demand, but it will come back with the oncoming festive season.
This kind of rise to USD 1800 plus per troy ounce is unprecedented. Any time there is a steep hike, consumers just hold back. So it is a combination of both basic demand as well as price of gold that has reduced demand. In the other two businesses, it is a natural dip in demand because of offseason; July, August, September is the offseason due there is a dip in demand. It is nothing serious.
Q: Considering that gold
looks set not to fall anytime soon, can you give us some guidance for
Q3? Will you be able to do last quarter’s numbers?
A:
First of all this USD 1800 plus per troy ounce is a very high price and
what will happen to that I cannot really say because we are not in the
commodity space. But on the jewellery side, the Diwali sales of Dhan
Teras & Dassera etc are likely to be as good as last year. The
growth however will not be there. So the number of consumers who are
going to buy is going to remain similar, atleast as far as Tanishq &
Gold Plus is concerned. We believe that sentiment, atleast in
jewellery, does not change. On Dhan Teras day and for weddings and
auspicious occasions, people do not just set aside gold. They invest in
gold as it is Laxmi. So I believe that there will be growth, but not the
kind we saw last year.
Q: So you are alluding to the volume growth; the volume may not come through because of the high prices. But in any case, high prices will help you drive your topline. So what kind of revenue growth do you have in mind for the full year now?
A: As a company, we are targeting for the whole year a little over 30% topline growth and similar bottom line growth too and that we should be able to achieve. A lot of that is powered by gold jewellery sales and that grew 43%. We should be growing around 35-40% overall, even for jewellery sales. I am talking about value because the price is going to help that.
Q: Given the uncertainty that we have across global markets and gold being seen as a safe haven asset, do you think this high price of gold could continue to be an issue for Titan? Will growth or volume growth be stunted because people will not be able to afford such high gold prices?
A: It would be an issue for the entire industry. But there are two fundamental drivers of demand in this business. One is the natural desire to adorn one self and the second is to invest. Solutions are available because consumers begin to limit the amount of money that they will spend on gold. We might have to rethink the segments we are pursuing, especially the caratage of gold. 22 carat is a large part of business and if prices go up, then you can rethink carat.
I mean you would have 22 carat gold and there would be 18 and 14 carat. These are not out of the space of imagination because it’s happening in the western world and it can happen here. Driving more and more consumers towards adornment rather than investment would be what will happen if prices hit that kind of number.
Q: Your investors are used to a well over 30% CAGR. What kind of compounded annual growth can you guide for the next few years?
A: We have not changed our projections for the future; we will continue to grow at the 30% plus in the jewellery business. We are going to be Rs 10,000 crore in the jewelry business by 2014-2015 and that date nor number has changed.
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EQUITY BULL
RAJESH DESAI
Are Titan Industries' best days behind it?
Published on Fri, Aug 26, 2011 at 12:02 | Source : Moneycontrol.com
 |
Moneycontrol Bureau
Titan Industries ’ shares, which doubled over 2010-11, have underperformed the broader market in recent weeks, falling 12% since it started trading ex-bonus and stock split on June 23. The broader Nifty-index is down 8% during the same period.
Many analysts still remain positive on Titan Industries, especially in the long term. However, the sentiment has slowly turned cautious, given the head winds like gold prices, which touched a record high of over USD 1,900 per troy ounce earlier this week and a 50% surge in diamond prices this year.
These headwinds might well have prompted Prashant Jain, the chief investment manager of HDFC Mutual Fund and considered as one of the shrewdest money managers in the industry to cut exposure of his funds to the company. HDFC Mutual Fund this week cut its stake in the watch to jewellery and eyewear maker to 3.06% from 5.11%.
Brokerage house HDFC Securities in its report highlights some of the risks it sees in Titan Industries.
"Rising prices and macro uncertainty are likely to lead to lower discretionary spending in the near future, particularly affecting watch sales. Driven by rising gold and diamond prices and store additions, we have increased our revenue estimates by 12% and 10% for FY12 and FY13 respectively.
However, our EPS estimate is the same since rising commodity prices along with 1% excise duty absorption on jewellery sales will lead to much lower flow through to bottomline," said analysts Sameer Narang and Vishal Modi.
The HDFC Securities analysts expect Titan’s gross as well as EBITDA margins will be impacted this year. They have a “hold” rating on Titan Industries with a target price of Rs 194 a share.
Titan Industries saw a strong growth in the first quarter. Net profit rose 76% year-on-year and net sales were up 61% boosted by watch and jewellery purchases in the wedding season. However, demand in the second quarter has come under pressure due to the headwinds.
Bhaskar Bhat, Titan’s managing director, told CNBC-TV18 this week he expects demand will pick up in the festive season, but there is unlikely to be a significant growth in volumes.
"On the jewellery side, the Diwali sales of Dhanteras & Dassera etc are likely to be as good as last year. The growth however will not be there. So the number of consumers who are going to buy is going to remain similar, at least as far as Tanishq & Gold Plus is concerned," Bhat said.
Diamond prices, up 50% this year mainly due to supply shortfall, is another concern. Studded jewellery, a high margin business, accounts for around 30% of Titan’s jewellery sales. Analysts say that any moderation in volumes here could have an impact on overall margins.
International brokerage CLSA had last month downgraded Titan to "sell," while others like Kotak Securities had advised investors to "reduce" exposure to the stock and Emkay downgraded it to "hold" from "accumulate."
But Titan still has support from several investors, including none other than the big bull Rakesh Jhunjhunwala, who continues to hold 7.28% of its shares. His wife Rekha holds another 2.49% stake. The combined investment value today is around Rs 1,780 crore.
In an interview to a financial newspaper in June, he said he is happy that the company had proved itself to be an extremely good robust company, with very good growth prospects and now getting very aggressive.
HDFC Equity Fund, HDFC Top 200 Fund, FID Funds Mauritius and Matthews Pacific Tiger Fund are among other entities who hold more than 1% stock of Titan Industries.
"We continue to like Titan’s dominant presence in its key business segments and its capital efficient growth model," said Prabhudas Liladher analyst Gautam Duggad in a note this week. The brokerage house has a "buy" on Titan.
EQUITY BULL
RAJESH DESAI
| Aiming in billions by 2015 | |
 Titan Industries, one of the biggest lifestyle industries in India has set a target for a $3 billion turnover by 2014-15. The industry is looking to tap new segments such as footwear, fragrances and writing instruments. Currently the industry has under its name well established brands such as Titan, Xylys, Sonata and Fastrack watches all of which are extremely popular. Titan Group also sells Tanishq jewelry and aims to make Rs.10,000 crore by this brand alone by 2014-15.Titan Eye Plus is also an equally successful brand. The company, in FY11 earned a revenue of Rs. 6521, 64 crore. The company has set itself a target of $3 billion in another four years time, and to get there, the group plans to explore new lifestyle segments and add a new category under their umbrella every two years. The lifestyle brand of India aims for luxury, and sees itself being the most admired brand globally in the coming few years. So preserve the old Titan watch of your mother’s, soon it is going to be priceless! |
EQUITY BULL
RAJESH DESAI
Titan to hike watch prices up to 20% on foreign exchange, gold hit
Oct 04, 2011
“Ideally, we would have avoided more than one price increase in a year, but we have to just to safeguard our margins,” Ajoy Chawla, senior vice- president, watch division, said.
The company had effected a 5 per cent price hike on Titan brand of watches in April. For its Swiss-made brand Xylys, too, the company had hiked prices by 8 per cent.
With consumers restricting discretionary spends, Chawla said there has been some slowdown in sales of watches in the ‘lower price’ segment of Rs 2,000 and below.
“Apart that we are seeing double-digit volume growth in watches priced Rs 5,000 and above,” he said.
Prices of Nebula, Titan’s line of gold watches, will be raised 15-20 per cent because of dearer yellow metal.
With effective landed price of Swiss-made watches rising in India due to currency fluctuations, Chawla said, prices of its Xylys watches will see a ‘significant’ hike, but post-Diwali.
While he did not give any guidance on price increase on flagship brand Titan, analysts said the company has planned a 4 per cent price hike.
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EQUITY BULL
RAJESH DESAI
EQUITY BULL
RAJESH DESAI
--
CA. Rajesh Desai
RAJESH DESAI
CA. Rajesh Desai
RAJESH DESAI
CA. Rajesh Desai
RAJESH DESAI
Report attached.
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CA. Rajesh Desai
RAJESH DESAI
Titan to acquire Swiss watch brand Favre Leuba for 2m euro
Titan Industries today said it is set to acquire Swiss watch brand Favre Leuba for up to 2 million Euro (over Rs 13 crore) as a part of its strategic business plan to expand product portfolio.
Titan Industries has signed a binding offer with Valfamily SL Spain and Maison Favre Leuba of Switzerland for the acquisition, post which Titan will secure global rights of the brand, Titan said in a filing to the BSE.
“This acquisition is being pursued on an asset purchase mode for a sum under Euro 2 million,” the filing said.
The strategic rationale behind the above acquisition is to complement and strengthen the existing watches brand portfolio of the company with a Swiss heritage brand, it said.
Favre Leuba, created in Switzerland in 1737, has a rich history in international markets, including India, it added.
CA. Rajesh Desai
RAJESH DESAI
| TITAN INDUSTRIES | |
|
The Q2FY12 numbers were disappointing. But this did not come as a surprise given the high gold prices, inflationary pressures and depreciation of rupee v/s the US dollar. These factors together pulled down the profitability of the companies watch segment. The company posted a 16% YoY rise in net profit for Q2FY12 at Rs.148 crore. This was much below the analyst expectations of net profit coming in the range of Rs.155-160 crore. The company has stated that its watch business was affected due to increasing input costs and adverse currency fluctuations and this pulled down the margins. Its advertising cost too was up over 47% which meant demand had to be stimulated which is why the advertising spend rose. Company’s employee costs went up by 19.8% on account of new store openings. To offset the high costs, the company has now announced an average price hike of 6% hike across all watches. Sales from its jewellery division, Tanishq, grew 45, which can be attributd to increased gold prices. Looking ahead, jewellery segment demand is expected to be a bit damp given the unaffordable price of gold and diamond. The festive season, current Q3, is seasonally the best but this time, festive sales too seems to be sluggish. |
CA. Rajesh Desai
RAJESH DESAI
Titan Industries Limited has informed the Exchange that the Board of Directors of the Company at its meeting held on April 30, 2012, have recommended a dividend on the equity shares of 175%, free of tax, viz., Rs.1.75 per equity share. (previous year: 125%, free of tax).
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CA. Rajesh Desai
RAJESH DESAI
Gold demand hits lowest in over 2 years; India weighs
By Jan Harvey
LONDON | Thu Aug 16, 2012 10:38am IST
(Reuters) - Gold demand fell to its lowest level in more than two
years in the second quarter, the World Gold Council said on Thursday,
as a drop in buying in major consumers India and China outweighed a
record quarter for central bank purchases.
Overall gold consumption fell 7 percent or nearly 76 tonnes to 990
tonnes in the three months to June, its lowest quarterly level since
the first three months of 2010, the WGC said in its quarterly Gold
Demand Trends report.
Jewellery and investment demand both fell substantially. Jewellery
consumption was down 72.3 tonnes at 418.3 tonnes, while investment
fell 88.3 tonnes to 302 tonnes.
The WGC's managing director for investment research, Marcus Grubb,
said he still expected demand growth in the full year but that
forecast was heavily dependent on gold-friendly policy moves from
central banks and a recovery in Indian demand.
"The real wild card is India. It depends how weak the latter part of
the year is and/or how much of an improvement we see," he said. "It
also depends on what happens from a macro perspective between now and
the end of the year to catalyse more buying.
"The obvious one would be a Greek exit from the euro zone," he said.
"It also depends on how things pan out in North America and whether we
get a policy response of more quantitative easing in North America and
Europe.
"In that scenario, you would see gold demand higher than last year. In
a scenario that is more benign, where we don't have a major event by
the end of the year, and India improves (only) a bit, it will be very
close to last year."
Investment and jewellery demand from consumers in India, the world's
number one gold market, plummeted 38 percent to 181.3 tonnes in the
second quarter. Buying has been hit by a hike in import duties and
record-high local prices due to a weak rupee.
"It's probable that the rupee will have a better second half, and that
might stem some of the decline in gold demand," Grubb said.
"Also, you have a seasonally stronger period for gold demand because
you have Diwali and other festivals," he added. "So we're forecasting
a better second half but still a very challenging environment in India
for gold."
Grubb said the WGC expected Indian demand to fall to 650-750 tonnes
this year from 933 tonnes in 2011 and Chinese demand to rise 10
percent to 850 tonnes.
"We're predicting that for the first time ever, China will be the
largest gold market in the world for the full year," he said.
CHINESE DEMAND FALLS
In the first half Chinese demand also fell 7 percent to 144.9 tonnes.
A slowdown in economic growth and a lack of clear price direction in
gold was behind the drop, the WGC said.
"This is the first negative quarter we've had in China in a long time,
but again we think this is linked to broader economic issues in China
rather than the gold market in particular," Grubb said.
Jewellery and investment purchases in the United States fell 17
percent to 34.2 tonnes, the same offtake that was seen in Germany
after a 51 percent jump in coin and bar investment. European Union
demand was a rare bright spot, rising 11 percent to 86.4 tonnes.
European buying has increased as consumers have sought refuge from the
euro zone debt crisis and its impact on the single currency, which is
down 5 percent against the dollar this year.
Grubb attributed a drop in U.S. demand to a stagnating price
environment. Spot prices had a lacklustre second quarter after a more
buoyant start to the year, trading at an average $1,612 an ounce,
their weakest quarter in a year.
"When the price has been in a range for this length of time, nearly 12
months, for investment products in particular, that does take the
market off the boil," he said.
"Investors will hang fire until they can see a clearer picture of how
the next price trend is going to develop. That is true in China of
investment products, and in America as well."
Official sector purchases of gold more than doubled, meanwhile, to a
record 157.5 tonnes in the last quarter, with Russia, Kazakhstan,
Turkey and Ukraine all announcing a rise in bullion reserves in that
period.
"If you look to the half-year, central banks have bought 254 tonnes
against 200 tonnes for the half-year last year," Grubb said. "At this
rate, we'll be looking at a record central bank year, higher than last
year, which was a record since 1964."
(Editing by Jane Baird)
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Karishma Suvarna
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CA. Rajesh Desai
RAJESH DESAI
Demand in current quarter to be better than Q1: Titan
S Subramanian, CFO, Titan, says that compared to the industry, Titan is doing better. Though we are not happy with 21% decline but it is better than the market which fell 38%. At all India level, there has been a decline in demand for last three quarters.
S Subramanian, CFO, Titan , says that Titan is doing better compared to the industry. Though we are unhappy with the 21% decline in gold volumes but it is better than the market where volumes are down 38%. At all India level, there has been a decline in demand for last three quarters.
There is combination of factors like high cost of gold, macro economic situation, high inflation, lower pay hikes and slow GDP growth resulting in sluggish demand. Subramanian expects this quarter to be slightly better than the first quarter.
Below is the edited transcript of his interview to CNBC-TV18.
Q: Do you expect jewellery demand decline to follow industry trends or for Titan to do better than the kind of slip that we are seeing in overall industry declines?
A: Titan is doing better compared to the industry. Though we are unhappy with the 21% decline in gold volumes but it is better than the market where volumes are down 38%. At all India level, there has been a decline in demand for last three quarters. In the first quarter, there has been a significant decline. This has not been an extraordinary quarter because we did not have any major festivals. We expect volumes to improve in coming Q3 and Q4.
Q: The World Gold Council is not painting a very rosy picture of the second half of the year either. What are your expectations looking at trends on the ground?
A: I agree with the World Gold Council to certain extend. From the rupee perspective, gold at Rs 30,000 is extremely high and expensive. I don't see a major shift in demand unless something happens to the rupee. Therefore, volumes are expected to be lower. We expect some revival and demand to pent-up in the Q3 due to festival like Dassera, Diwali and Christmas falling in the same quarter.
Q: But for the current quarter, the first quarter trends will continue?
A: It will be slightly better because we had Akshaya Tritiya in the first quarter . So April was a very good month but May and June was bad for the whole industry. July was better than May and June. Overall, it might be slightly better than the Q1.
Q: What are the factors for sluggishness demand? Do you think it is a cyclical patch or is it only dependent on the level of prices?
A: There is combination of factors like high cost of gold, macro economic situation, high inflation, lower pay hikes and slow GDP growth resulting in sluggish demand. The mood in the country is not very buoyant. There will be sluggish demand till people are comfortable to spend more. At this point of time tightening up of process is happening.
Q: The watches segment grew under 14-15% in the quarter gone by. Are trends reasonable or there is any king of sluggishness in that market too?
A: The growth of 14% was great in a quarter where things were generally quite bad. Now we are hopefully seen some revival. Positively, the monsoon is not as bad as we though it was and that might spur rural demand at some point in time. So if that happens, things would be better than what it was in Q1.
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CA. Rajesh Desai
Rajesh Desai
Dear Sir/Madam,
Q4 FY13 Result
Titan Industries Net Sales increased by 15% YOY to INR2613 crore YOY and its EBITDA increased by 28% YOY to INR267 crore. EBITDA Margin of the company increased from 9.1% to 10.2% YOY. PAT of the company increased by 28% YOY to INR185 crore. PAT of the company was above Estimates. Jewellery segment registered a growth of 16.3% YOY to INR2093 which was below the estimated growth of 20%. Watch Segment Sales grew by 1.4% against the expectation of 9-10% growth.
FY13 Annual Result
In FY13, the company’s Net Sales increased by 14% YOY to INR10113 crore YOY and it’s EBITDA increased by 21% YOY to INR1011 crore. EBITDA Margin of the company increased from 9.4% to 10.0% YOY. PAT increased by 21% YOY to INR725 crore. At the CMP of INR270, the stock discounts its FY13 EPS of INR8.17 by 33x.
|
DESCRIPTION |
Mar-13 |
Dec-12 |
Mar-12 |
QOQ |
YOY |
FY13 |
FY12 |
% change |
|
Net Sales |
2613 |
3018 |
2282 |
-13% |
15% |
10113 |
8838 |
14% |
|
Total Expenditure |
2347 |
2735 |
2074 |
|
|
9102 |
8005 |
|
|
PBIDT (Excl OI) |
267 |
283 |
207 |
-6% |
28% |
1011 |
833 |
21% |
|
EBITDA (%) |
10.2% |
9.4% |
9.1% |
|
|
10.0% |
9.4% |
|
|
Other Income |
30 |
22 |
25 |
|
|
101 |
94 |
|
|
Operating Profit |
296 |
305 |
233 |
|
|
1111 |
927 |
|
|
Interest |
14 |
12 |
13 |
|
|
51 |
44 |
|
|
PBDT |
282 |
293 |
219 |
|
|
1061 |
883 |
|
|
Depreciation |
15 |
14 |
12 |
|
|
54 |
45 |
|
|
PBT |
267 |
279 |
207 |
|
|
1006 |
838 |
|
|
Tax |
82 |
75 |
63 |
|
|
281 |
238 |
|
|
Profit After Tax |
185 |
204 |
144 |
-9% |
28% |
725 |
600 |
21% |
|
PAT(%) |
7.1% |
6.8% |
6.3% |
|
|
7.2% |
6.8% |
|
|
Equity Capital |
88.78 |
88.78 |
88.78 |
|
|
88.78 |
88.78 |
|
|
Face Value (In Rs) |
1.00 |
1.00 |
1.00 |
|
|
1.00 |
1.00 |
|
|
No. of shares |
88.78 |
88.78 |
88.78 |
|
|
88.78 |
88.78 |
|
|
|
|
|
|
|
|
|
|
|
|
EPS |
2.08 |
2.29 |
1.63 |
-9% |
28% |
8.17 |
6.76 |
21% |
Regards,
Team Microsec Research
CA. Rajesh Desai
Rajesh Desai
Event Update - ANTIQUE
Jewellery Retail - Gold curbs a short-term issue
After a detailed discussion with RBI officials on the RBI notification dated 4th June 2013 Titan Industries management provided certain clarifications which is expected to impact earnings of jewelers by about 8-10% during FY14e and FY15e. On Titan Industries, we expect the impact on earnings to be to the tune of 8% per annum during FY14e and FY15e leading to an EPS of INR8.7 and INR11.1 respectively while in case of TBZ, we expect earnings to be impacted by 9% and 10% during FY14e and FY15e to INR18.1 and INR26.4. The difference in impact would be due to the benefit of VAT on direct imports available to Titan industries.
In our view, the Indian jewellery industry would witness a de-rating in the short term due to the government tightening on gold imports and the consequent impact on earnings. More importantly, the concern over the government's intent to restrict gold imports would have a bearing on the sector valuations in the short term as the probability of further such actions by the government cannot be ruled out. However we remain positive on the sector fundamentals over the medium to long term due to the low penetration of organised jewellery retail in the country. We recommend a HOLD on Titan Industries (PE- 20x FY15e) and TBZ (PE - 9x FY15e) in the current scenario with a target price of INR221 and INR237 respectively.
Titan's clarifications on the RBI notification
1) All imports of gold for domestic consumption, either through banks, nominated agencies or directly can be made only with 100% cash margin. 2) Credit of any kind from suppliers or bullion banks for import of gold for domestic use is prohibited. This also affects import of gold through all non consignment routes like gold on lease / loan. 3) RBI is firm that the implementation of the notification needs to be both in letter and spirit.
Titan Industries held a management conference call to provide further clarity on the press release by the company on RBI notification. Following are the key highlights
• Gold sourcing effectively will be on spot basis as against the earlier practice of sourcing gold on lease.
• Titan will resort to direct imports of gold and will save thereby about 1% on VAT
• The company is looking at various options of financing the working capital for gold purchases.
• Titan expects to turn in to a net borrower in the next 3-4 months.
• Company will review its retail space expansion post the RBI notification
• The management is looking at various options for gold hedging. We understand that the company can hedge its complete gold inventory on exchanges.
Going by Titan's clarification, we expect the following impact on jewellery companies:
Interest cost would increase by about 550-750bps
Going ahead due to the higher cost of working capital as compared to the cost of gold on loan, interest outgo is expected to increase by about 550bps-750bps. Consequently the cost of working capital, we estimate would be at 10-10.5% as against the total cost of loan for gold at about 3.5-5%. This would lead to an impact of 8-10% at the PAT level. In Titan's case, the impact on earnings according to our detailed analysis (provided in the note) is estimated would be to the tune of 8% during FY14 and FY15 to INR8.7 and INR11.1 respectively, while in case of TBZ we estimate the impact on PAT to be about 9% and 10% during FY14 and FY15 respectively. The impact on Titan Industries would be lower due to the 1% VAT waiver on gold imports.
Titan's RoCEs to be impacted due to gold loan re-classification, more importantly RoEs will be intact
The reclassification of the debt for gold inventory, under the working capital debt as compared to the current practice of grouping it under the current liabilities would lead to an optical increase in capital employed (especially for Titan Industries as TBZ already classifies it under the working capital debt). RoCE of Titan Industries for FY14 and FY15 will drop to 27% from 48% in FY13. However Titan's RoEs will not witness any meaningful impact. The impact on RoEs will be limited to the impact on earnings.
No impact expected on jewellery sales
Despite the increase in cost of financing of jewellery companies post the RBI notification, we don't expect any change in consumption levels of jewellery. According to our channel checks, we understand that there has been a slowdown in the domestic jewellery consumption post a strong April and May 2013. We expect jewellery consumption would continue to be driven by the marriage season and consumer confidence. We continue to be positive on the sector from a medium to long term perspective.--
CA. Rajesh Desai
Rajesh Desai
Titan Industries has combined its loyalty programmes across three brands into one Encircle Loyalty card. Earlier it used to run three separate loyalty programmes - Vista for its Titan Eye Plus, Anuttara for Tanishq and Signet for its World of Titan. With this initiative, customers will be able to redeem points across all brand stores. After this move, Titan customers can redeem points across 950 stores of its various brands whereas earlier it was limited to only one channel.
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CA. Rajesh Desai
Rajesh Desai
Titan Industries has inked an exclusive pact with motorcycle brand Ducati to introduce a range of special-edition watches. The 'Titan Ducati' range has been launched which is a collection of eight watches inspired by the Ducati models. These watches have stainless steel body, carbon fiber dials and fully automatic multifunction calibers.
This special edition time pieces are priced from Rs 22,995 to Rs 26,995 and will be available exclusively at select Titan, Helios and Department stores in Delhi, Mumbai and Bangalore.
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CA. Rajesh Desai
Rajesh Desai
Retail: Impact on jewelers from the new RBI circular on Gold import
RBI’s
circular on gold imports released yesterday reverses the restrictions
imposed in its previous circulars around use of letter of credit (for
gold lease) and use of consignment imports for domestic consumption.
These restrictions have been replaced by a requirement that at least 20%
of gold imports have to be used by the nominated banks/agencies for the
purpose of exports. Implications for jewelers include: a) Gold-lease
business model for jewelers like Titan and TBZ gets restored, thus
concerns around increased cost of inventory finance and ability to fully
hedge against commodity price risk will go away; b) Availability of
gold, which previously was constrained by consignment import
restrictions, will now be constrained by the “20% for exports”
restriction for the importers; and c) Domestic consumption through
imports can only be for jewelry business. We expect the impact of this
circular to be positive for firms like Titan and TBZ, given the
restoration of gold lease model and requirement to import for domestic
consumption only as jewelry. However, the constrained availability of
gold going forward will necessitate these firms to pay a premium over
spot rate for gold procurement through the nominated banks/agencies. (Rakshit Ranjan, +91 22 3043 3201)
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CA. Rajesh Desai
Rajesh Desai
Titan Industries Q1 net up 16.88% to Rs 182.48 cr
The operating profit went up 15.36% to Rs 230.32 crore from Rs 199.64 crore
Titan Industries Limited, the watch, jewellery and precision engineering products maker from the Tata Group, today reported 16.88% rise in net profit at Rs 182.48 crore for the first quarter ended June 30, 2013 compared to Rs 156.12 crore in the same quarter last year.
The operating profit went up 15.36% to Rs 230.32 crore from Rs 199.64 crore in the corresponding quarter last fiscal.
The net sales for the quarter went up 42% to Rs 3,087.79 crore as against Rs 2,174.74 crore in the first quarter of last fiscal.
The fall in gold prices at the end of the quarter, has had an adverse impact of Rs 34 crore on the consumption of gold as well as the results for the quarter.
During the quarter, the watch division recorded 11.35% rise in net sales at Rs 402 crore, while the jewellery division sales grew 47% to Rs 2,614 crore.
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CA. Rajesh Desai
Rajesh Desai
Though it has recovered from its 52-week low levels, the stock came under heavy selling pressure on Tuesday, skidding 7.5%, or Rs 21, to Rs 260 levels in intra-day deals. The S&P BSE Consumer Durables index that lost 5.5%, as compared to around 1.7% fall in the S&P BSE Sensex and the CNX Nifty is among the top sectoral losers in trade.
Points out Chandan Taparia, derivative analyst, Anand Rathi Financial Services: “The stock had been range-bound since the past few sessions. F&O parameters indicate long liquidation. There is some support at Rs 253 – 255 levels and it will face resistance at Rs 220 levels.”
On the policy front, reports suggest that in a move to curb the import bill and bring down the current account deficit (CAD), the finance ministry has compiled a list of non-essential goods which could be subjected to higher customs duty, which includes pearls, precious and semi-precious stones.
Analysts suggest that a hike in duty will be a double whammy for importers who are already facing the brunt of a falling rupee. Measures to curb import of gold have also impacted sentiment.
A K Prabhakar, senior vice-president (equity research), Anand Rathi feels that fear of more control as regards gold imports is taking a toll on the stock in trade today.
“Recent policy action by the RBI to constrict gold imports for India clouds the long-term growth visibility for Titan. Based on our calculations, recent policy changes may restrict overall gold imports to ~200 tons pa (versus ~573tons of jewellery demand and ~923 tons of total demand in F13). We expect multiples to compress as markets factor uncertainties around low visibility in long-term growth, risks to operating margins, higher hedging costs, increased earnings volatility, and so on,” points out a Morgan Stanley July 2013 report.
“Valuations are not supportive either. Despite being the weakest performer in our coverage universe YTD, Titan’s 12-month-forward P/E (26.5x) stands at an 11% premium to its five-year average. At our target price of Rs 205, the implied F15e P/E is 19x,” it adds.
However, Amnish Aggarwal of Prabhudas Lilladher remains bullish on the stock and suggests that strong balance sheet and brand of will enable it to source gold at more competitive costs than its peers and unorganised players and increase its competitiveness and market share. Although grey areas regarding 20% sourcing by banks for exports and SEZs are still there, according to him, the visibility on profitable growth is improving.
“We expect Jewellery margins to decline 50bps in FY14 due to deterioration in sales mix, FY15 outlook looks bright with 60bps margin expansion and 31% EBITDA growth. Watch business will gain from planned restructuring with 110bps margin expansion in FY15 (210bps decline in FY14) with 28% EBIT growth. We are increasing FY14 and FY15 EPS estimates by 5.3% and 14% to Rs9.8 and Rs13.1, respectively. We value the stock at 23xFY15 with a target of Rs 302,” he says.
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CA. Rajesh Desai
Rajesh Desai
Titan Industries, the country’s leading watch, jewellery and eyewear maker, will enter the helmet market in early 2014, with a superior quality product to ensure safety and comfort of two-wheeler riders. The company will, however, not manufacture helmets but source them from vendors in the sector and market them under its Titan brand. The company is also planning to enter into fragrance market in the near future.
Titan is India’s largest manufacturer of quartz watches and has a 60% market share in the Indian market. It is world’s sixth largest manufacturer of branded watches. It has a manufacturing and assembly unit at Hosur in Tamil Nadu.
CA. Rajesh Desai
Rajesh Desai
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CA. Rajesh Desai
Rajesh Desai
CA. Rajesh Desai
Rajesh Desai
CA. Rajesh Desai
Rajesh Desai
Titan unveils Onam collections
Titan has introduced two wrist watches for men and women in the Kerala market to coincide with Onam festival. These are the ‘Opera’ and ‘Automatic,’ a spokesman for the watch company said here. The ‘Opera’ time piece for women draws inspiration from the magnificent Palais Garnier opera house in Paris. The Automatic from Titan’s fashion collection is a hand-wound masterpiece. It has a dual tone solid link strap and a skeletal look.
CA. Rajesh Desai
Rajesh Desai
The company, which sells diamond jewellery through its retail storeTanishq, also said it is planning a new collection priced below Rs 50,000 to cash in on a surge of diamond sales during the festive season and Diwali in particular.
"We are focusing on the sale of diamonds and our target is to achieve about 25 to 30% growth, but the first quarter was much lower. The second quarter has been better and in the range of our target. We hope the third quarter will climb further," C K Venkataraman, COO of the jewellery division told Business Standard.
Sources say a 15% discount scheme offered by Tanishq on its diamond jewellery line in August was lapped up well by consumers, leading to the increase in sales volumes.
The company said it has traditionally seen sales of diamond jewellery during Diwali and is planning a range of offers to increase sales during the festive season. A new "Diwali" range of diamond jewellery is being slated for launch during the festive season and is priced below Rs 50,000 with pendants, rings and earrings.
The fiscal first quarter saw consumers thronging Tanishq stores to buy more gold jewellery due to low gold prices. However, the diamond segment took a hit, accounting for only 16% of total jewellery sales. The company's aim has been to increase its share of diamond sales to 40% of its total jewellery sales. It has even managed to shore it up to 30% of its sales but over the last few months gold jewellery has stolen the limelight at its stores.
"In the first quarter, the gold segment just shot up. As it is diamond sales have been a challenge in the industry for the last seven-eight months as it is a very discretionary category, a postponable one," Venkataraman said.
Though the purchase of gold jewellery is always seen as an investment by Indians, diamond jewellery has been less accepted due to the perception that its resale value is low. Besides, the value of gold has appreciated at a rapid pace over time, but consumers remain apprehensive that the value of diamonds do not appreciate as much.
"We are pushing diamond jewellery growth and there are many initiatives underway. Over the next five months, we hope to create a very, very strong pull for diamond jewellery and actually help push our gross margins and hit our earnings targets for the year," Venkataraman said.
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CA. Rajesh Desai
Rajesh Desai
Titan Company’s watch brand - Sonata, is the only watch brand in India to accomplish this milestone and achieve the fastest 50 million consumers. To commemorate this milestone, Sonata has launched its largest campaign for the year and has introduced 30 new watches this Diwali. Priced between Rs 799 to Rs 2,299, the Sonata collection is available in World of Titan and other authorized retailers across the country.
Sonata, India’s largest selling watch brand, with a market share of 35 percent (as estimated by Franchis Kanoi Marketing Research, in the organized market segment) has increased its market share by 3 percent (overall watch market) in the last five years with the success of the Super Fibre series which were the fastest selling timepieces in the history of the company.
Rajesh Desai
The company had reported net profit of Rs 180.17 crore for the July-September quarter of last fiscal, 2012-13.
Titan's net sales were at Rs 2,290.02 crore during Q2, 2013-14, an increase of 1.40% as against Rs 2,258.29 crore in the year-ago period.
Titan Industries Manging Director Bhaskar Bhat said: "This was a challenging quarter on account of weak consumer sentiments, particularly for discretionary purchase categories like watches and jewellery. The continued inflation and the weak rupee are affecting demand as well as costs and interest rates that continue to be at high levels."
Titan's revenue from watches during the quarter was at Rs 442.36 crore, down 6.23%, although revenues from jewellery increased by 4.3% at Rs 1,798.07 crore.
"The watch and eyewear businesses of the company, with a decent import content, continued to be affected by input cost increases and adverse currency movements." the company said.
On the outlook for the quarter ahead, Bhat said: "Given the good monsoon across the country and a likely change in consumer sentiment driven by stock market movement, we are hopeful of a good second half."
Overall expenses of the company were at Rs 2,082.14 crore during the quarter under review, an increase of 2.08% as compared with Rs 2,039.6 crore in the year-ago period.
CA. Rajesh Desai
Rajesh Desai
Titan Company has achieved a rare milestone in the history of Indian specialty retail by opening its 1000th store in Bangalore. With this, Titan Company arguably becomes the first Indian company with 1000 stores in seven varied formats under watches, jewellery and eyewear categories. Reflecting the future of modern retail and lifestyle industry, the 1000th store, a unique fusion of Watches and Eyewear was opened.
With a retail footprint across 177 cities, 26 states, 3 Union Territories and a total retail area of 1395712, Titan Company has stores for Watches under World of Titan, Helios and Fastrack; Jewellery under retail brands Tanishq, Zoya, GoldPlus and Eye Plus for multibrand eyewear.
CA. Rajesh Desai