MOSL: TITAN COMPANY (Buy) - Margin expands strongly led by Jewelry - more upbeat commentary
TITAN COMPANY: Margin expands strongly led by Jewelry; more upbeat commentary
(TTAN IN, Mkt Cap USD12.9b, CMP INR973, TP INR1150, 18% Upside, Buy)
- Titan's 4QFY18 reported revenue (incl. other operating income) rose 13.3% YoY to IN41.1b (est. of INR40.4b). EBITDA grew 70.3% YoY to INR4.4b (est. of INR3.6b) and recurring PAT rose 72.2% YoY to INR3.1b (est. of INR3.0b).
- segmental performance: a) Reported Jewelry sales were up 14% YoY to INR33.6b, with segmental margin up 360bp YoY to 12.6%. b) Watches sales declined 3% YoY to INR4.9b, with EBIT margin up 250bp YoY to 3.5%.
- Gross margin expanded 110bp YoY to 29.4%, while EBITDA margin inched up 350bp YoY to 10.6% (est. of 9.0%) in 4QFY18.
- FY18 consol. performance: Net sales were up 21.6%, EBITDA was up 42.3% and PAT rose 39.9% YoY. EBITDA margin expanded 150bp to 10.2%. Jewelry sales grew 24.3% to INR130b, largely in line with the 25% guidance at the beginning of the year. Watches sales grew 3.6% YoY to INR21b, with growth appearing muted due to the GST effect.
- Concall highlights: 1) Wedding and high-value diamond jewelry is now around 33% of sales. 2) Golden Harvest Scheme was 14% of sales in FY17, which increased to 17% in FY18 and management expects a further improvement.
Titan is engaged in the watch division where Co. manufactures and sells a variety of watches with varying price range within India and overseas; in the jewelry division where Co. works through Tanishq and Zoya. Tanishq has a range of jewelry studded with diamonds or coloured gems in 18 kt gold, 22 kt pure gold and platinum; and Zoya is a chain of luxury jewelry boutiques; in the eyewear division where Titan Eye+ retails products which showcase contemporary designs, coupled with optical exams with Sankara Nethralaya; and in the precision engineering division, Co. sells its components globally and helps build machinery.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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