Motilal Oswal - Titan Company Limited (TITAN) MOSL: TITAN COMPANY (Neutral)-Advancement and PMLA affect 2QFY18 sales

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Motilal Oswal

Krishnan Sambamoorthy

MOSL: TITAN COMPANY (Neutral)-Advancement and PMLA affect 2QFY18 sales

TITAN COMPANY: Advancement and PMLA affect 2QFY18 sales

(TTAN IN, Mkt Cap USD7.8b, CMP INR576, TP INR590, 2% Upside, Neutral)

Titan (TTAN) has released its pre-quarterly update for 2QFY18. Key highlights:

TTAN witnessed some slowdown in the first half of July due to the advancement of sales in the second half of June in the run up to GST rollout (on anticipation of higher rates). Despite the slowdown, the company's Jewellery business continued to gain market share.
Watches and Eyewear businesses saw good growth during the quarter.
We maintain our Neutral rating with a revised target price of INR590 (43x Sep-2019E EPS, in line with three-year average multiple).
Jewelry: Continues expanding market share
Jewellery sales in 2QFY18 were impacted by the advancement of sales in June to the extent of INR2.5-3b, subdued response to diamond-studded activation (which went on from end-July to early-September), and the inclusion of gold under the Prevention of Money Laundering Act (PMLA) from August.
Under the Prevention of Money Laundering Act, jewelers are obligated to collect KYC documents for all sales above INR50,000 and also file certain returns. The company believes that the existing rules under this act would need amendment for the jewellery sector as they are designed for the banking and financial services sectors. The industry is also making representation to relax the limit of INR50,000.
Despite the slowdown, the segment continued gaining market share.

The quarter saw two new collections, which were associated with: 1) movie 'Padmavati' and 2) 'Jewels of Royalty' - wedding and high-value-added diamond-studded jewelry.

29/09/2017 6 EN

Underlying

Titan Company Limited

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.

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INE280A01028 National Stock Exchange of India India

Provider

Motilal Oswal

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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Analysts

Krishnan Sambamoorthy

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MOSL: TITAN COMPANY (Neutral)-Advancement and PMLA affect 2QFY18 sales

Titan Co. Ltd: 1 director

MOSL: TITAN COMPANY: Jewelry demand robust; margin outlook improving

An unfavourable environment weighs on TITAN COMPANY, which sees a downgrade to Slightly Negative

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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