MOSL: TITAN COMPANY (Buy)-Jewelry sales remain robust; margins impacted by certain one-offs
Titan Company: Jewelry sales remain robust; margins impacted by certain one-offs
(TTAN IN, Mkt Cap USD10.4b, CMP INR848, TP INR1045, 23% Upside, Buy)
- TTAN’s 2QFY19 reported consol. revenue increased 27.5% YoY to INR45.7b (our estimate: INR42b). EBITDA grew 11.2% YoY to INR4.7b (our estimate: INR5.1b), while adj. PAT rose 8.8% YoY to INR3b (our estimate: INR3.4b).
- segmental performance: (a) Jewelry sales grew 29% YoY to INR36.5b, but the segmental margin shrank 200bp YoY to 10.4%. (b) Watches sales rose 17.5% YoY to INR6.8b, with the EBIT margin expanding 210bp YoY to 16.4%.
- Concall highlights: (1) TTAN witnessed 29% growth in the 40-day Dussehra-Diwali festive period; likely to maintain momentum for the remainder of 3QFY19. (2) Other expenses had certain one-offs: (a) INR290m provision on IL&FS investment exposure (total investment: INR1.45b), (b) inventory valuation loss of INR180m, which will reverse in the subsequent quarter and (c) INR150m compensation cost to franchisee toward taking over two large profitable stores in Hyderabad.
- In 1HFY19, sales/EBITDA/adj. PAT grew 17.9%/21%/19.7% YoY. For 2HFY19, we expect sales/EBITDA/adj. PAT growth of 19.3%/25.6%/25.4% YoY.
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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