28 January 2014
3QFY15 Results Update | Sector:
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Free float (%)
TP: INR470 (+17%)
M.Cap. (INR b) / (USD b) 355.5/5.7
Avg Val (INR M)/Vol ‘000 427/1320
Financials & Valuation (INR b)
2015E 2016E 2017E
Jewellery in-line, watches drag 3Q
Titan’s (TTAN) 3QFY15 results were below estimates due to weak performance of
Watch division. Sales were at INR29b, up 9.4% YoY (est. INR29.7b), EBITDA grew
6.2% YoY to INR2.52b, with 20bp margin contraction to 8.7% (est. 9.5%). PAT
growth of 7.2% YoY to INR1.9b (est. INR2.1b) was impacted by delayed benefits of
hedging gains. As per management, 75% of total gains will be accrued in 4QFY15.
Jewellery division posts healthy performance despite absence of GHS:
revenue grew 11% YoY (in-line), with grammage growth of 25% (11% excluding
coins as base did not have coins), driven by Goldplus format (30% growth). The
11% revenue growth in Jewellery despite the absence of Golden Harvest Scheme
(typically contributed ~30% of sales) is healthy, in our view. Jewellery EBIT posted
12.5% YoY growth, with 10bp YoY margin increase to 9.6% despite a) mix
deterioration due to outperformance of Goldplus format and b) absence of
hedging gains. Higher production of jewellery from Pantnagar unit resulted in
lower tax rate. The 100% tax benefit from this unit is available for two more years.
LTL sales declined 8% in Tanishq, while it was up 30% in GoldPlus. TTAN added
15,000sqft of space in Jewellery in 3QFY15 (added 71,000 in YTDFY15).
Watch division disappoints:
Watch division posted 2% revenue decline (4%
volume decline) due to weak festive season sales and higher promotion activity in
e-commerce. World of Titan and Fastrack posted 3% and 6% SSS decline,
respectively. Segment EBIT margin eroded 70bp to 9.7%, with 9% YoY decline in
EBIT. Eyewear division posted 22% revenue growth.
a) Despite removal of 80:20 import restrictions, customs
authorities are not allowing shipments for domestic consumption on credit as of
now. However, TTAN has been procuring gold on credit from other sources (SBI
Gold Deposit etc). b) Net cash balance sheet as of 3QFY15 v/s net debt QoQ.
Valuation and view:
We raise the estimates marginally to incorporate the lower
tax rate. Healthy jewellery performance, despite absence of GHS, was a key
positive, in our view. Maintain
with a target price of INR470 (30x FY17E EPS,
three-year average P/E). Volatility in gold price is a key risk.
(Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
(Manish.Poddar@MotilalOswal.com); +91 22 3027 8029
Investors are advised to refer through disclosures made at the end of the Research Report.
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