MOSL: TITAN COMPANY (Downgrade to Neutral)-Guidance cut, expensive valuations lead to downgrade
TITAN COMPANY: Guidance cut, expensive valuations lead to downgrade
(TTAN IN, Mkt Cap USD16.1b, CMP INR1284, TP INR1275, 1% Downside, Downgrade to Neutral)
- revenue increased 2.1% YoY to INR46.6b (our estimate: INR48.2b) in 2QFY20. EBITDA rose 11.4% YoY to INR5.2b (our estimate: INR5.2b), PBT declined 3% YoY to INR4.3b (our estimate: INR4.4b), while recurring PAT grew 3.8% YoY to INR3.1b (our estimate: INR3.2b). For 1HFY20, sales/EBITDA/adj. PAT were up 8.8%/15.1%/7.5% YoY.
- gross margin expanded 130bp YoY to 29.7%. Lower other expenses (-60bp YoY) and ad spends (-20bp YoY) were offset by higher staff costs (+120bp YoY to 6.5%). EBITDA margin expanded 90bp YoY to 11.2% (our estimate: 10.8%).
- segmental performance: (a) Reported Jewelry sales stood flat YoY at INR36.5b (volume down 14% YoY, SSSG up 2% YoY), with the EBIT margin flat YoY at 10.4%. (b) Sales of Watches grew 6.1% YoY (volumes down 1% YoY) to INR7.2b, with the EBIT margin down 200bp YoY to 14.4%.
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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