MOSL: TITAN COMPANY (Upgrade to Buy)- Value migration from informal sector – a structural growth driver
​Titan Company:Value migration from informal sector – a structural growth driver
(TTAN IN, Mkt Cap USD8.7b, CMP INR659, TP INR850, 29% Upside, Upgrade to Buy)
- Titan's (TTAN) 2QFY18 reported revenues were up 29.6% YoY (est. of +15%) to IN34.7b. EBITDA grew 50.6% YoY to INR3.98b (est. of INR2.69b), while recurring PAT increased 64.6% YoY to INR2.78b (est. of INR 1.89b).
- Gross margin contracted 530bp YoY to 26.1%. Other expenses were down by 540bp and ad spends by 60bp, while staff costs increased 100bp YoY. EBITDA margin thus expanded 160bp YoY to 11.5% in 2QFY18. Reclassification of cost led to lower other expenses in 2QFY18.
- Segment-wise: a) Jewelry sales were up 37% YoY to INR27.5b, while segment margin expanded 230bp YoY to 12.7%. b) Watches sales grew 9% YoY to INR5.7b, with EBIT margin improvement of 350bp to 14.5% in 2QFY18.
- 1HFY18 performance: Sales, EBITDA and adj. PAT grew 36%, 38.4% and 36% YoY, respectively. Jewelry sales grew 49.4% YoY, with EBIT margin expansion of 120bp YoY.
- Concall highlights: 1) Festive season (21st September to 31st October) sales were up by 16-17% YoY. If not for PMLA, growth would have been even better, despite a high base of 50% sales growth in the festive season last year. 2) Government actions taken to formalize the economy have started to benefit Jewelry significantly and marginally for Watches.
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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