Titan Company
BSE SENSEX
30,188
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
S&P CNX
9,401
TTAN IN
887.8
445.5 / 6.9
506 / 296
0/35/15
632
47.0
12 May 2017
4QFY17 Results Update | Sector: Retail
CMP: INR495
TP: INR505 (+2%)
Neutral
Remarkable growth in Jewellery; Margin below estimates
Titan’s (TTAN) 4QFY17 revenue grew 43.4% YoY (est. of +23.3%) to IN34.3b.
EBITDA grew by 30.3% YoY to INR2.7b (In-line with estimates) and recurring
PAT by 8.6% YoY to INR2.03b (est. of INR1.72b).
Gross margin shrunk 420bp YoY to 25.1%,
with EBITDA margin contracting
80bp YoY (est. of +80bp) to 7.9% in 4QFY17. There was a reduction of 290bp
YoY in other expenses to sales to 8.2% and of 50bp YoY in staff costs to sales to
5.1%, partially offsetting gross margin contraction.
Jewelry sales were up 55% YoY to INR28.6b
(52% same-store growth), with
segment margin contracting 140bp YoY to 9.9%. Gold tonnage increased 37%
YoY in 4QFY17. Watches sales grew 10.8% YoY to INR4.98b, with 70bp EBIT
margin expansion to 2.4%. Eyewear sales grew 13% YoY to INR1.1b. At the end
of the quarter, the company had 1,366 stores with an area of 1.8m sq.ft.
FY17 performance:
Sales, EBITDA and adj. PAT were up 14%, 34.7% and 21.5%,
respectively. Jewellery sales were up 17%, crossing INR100b mark, with
segmental margins expanding 100bp YoY to 10.1%.
Concall highlights:
1) FY18 – will pursue growth and maintain EBIT margin in
Jewelry. April also witnessed double-digits growth in Jewelry. 2) In FY18, the
focus will be on growth and cost efficiencies. 3) Tax rate will be 28-29% in FY18.
Valuation view:
There are minor adjustments to our FY18E/FY19E EPS. There
has been strong revival as well as market share gain in Jewellery. Management
is confident of healthy growth after GST implementation as well. EPS growth is
not as high as 15%/20% EBITDA growth for FY18/FY19 due to an increase in
income tax rate over FY17 levels. Valuations at 40.7x FY19E are rich. Maintain
Neutral
with a revised target price of INR505 (valued at 41.4x Mar’2019 EPS, in
line with three-year average multiple).
Financials & Valuations (INR b)
Y/E Mar
2017 2018E 2019E
Net Sales
129.8 147.1 173.0
EBITDA
11.6
13.2
15.7
PAT
7.0
9.1
10.8
EPS (INR)
9.0
10.3
12.1
Gr. (%)
18.5
13.8
18.2
BV/Sh (INR)
47.7
53.9
62.2
RoE (%)
20.6
20.2
20.9
RoCE (%)
21.1
20.9
21.4
P/E (x)
54.8
48.1
40.7
P/BV (x)
10.4
9.2
8.0
Estimate change
TP change
Rating change
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Krishnan Sambamoorthy
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
Vishal Punmiya
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261

Titan Company
Key Quarterly Charts
Exhibit 1: Segmental Snapshot
INR m
Total Sales
Watches
YoY Growth
Jewelry
YoY Growth
Others
YoY Growth
Total EBIT
Watches
YoY Growth
EBIT Margin
Jewelry
YoY Growth
EBIT Margin
Others
1QFY16
26,050
4,852
20,729
469
2,311
474
9.8%
1,815
8.8%
22
2QFY16
26,853
5,524
19,827
1,501
2,026
835
15.1%
1,205
6.1%
(13)
3QFY16
34,374
4,838
28,203
1,333
3,108
324
6.7%
2,903
10.3%
(119)
4QFY16
24,062
4,491
18,466
1,106
2,194
77
1.7%
2,078
0.0%
11.3%
39
1QFY17
26,940
4,917
1.4%
21,383
3.2%
639
36.2%
2,047
92
-80.6%
1.9%
2,039
12.3%
9.5%
(83)
2QFY17
26,793
5,237
-5.2%
19,875
0.2%
1,681
12.0%
2,785
643
-23.0%
12.3%
2,182
81.1%
11.0%
(40)
3QFY17
39,299
5,083
5.1%
32,550
15.4%
1,666
25.0%
3,776
529
63.1%
10.4%
3,343
15.1%
10.3%
(95)
4QFY17
34,858
4,978
10.8%
28,621
55.0%
1,259
13.8%
2,885
121
56.7%
2.4%
2,824
35.9%
9.9%
(60)
Source: Company, MOSL
Exhibit 2: Net space addition of 81k sqft. In FY17 vs FY16 (excluding Mia and Carat lane stores)
Space (in ‘000 sqft)
Format
World of Titan
Fastrack
Helios
Tanishq
Goldplus
Zoya
Eye+
Total
FY14
Space
412
92
53
820
81
7
155
1620
Stores
430
154
42
174
33
2
366
1201
Space
416
90
53
718
81
7
225
1590
FY15
Stores
427
157
43
177
33
2
384
1223
Space
423
94
48
808
81
7
259
1720
FY16
Stores
452
159
41
193
32
2
404
1283
Space
420
90
50
868
73
7
293
1801
FY17
Stores
474
155
49
208
29
2
448
1365
Source: Company, MOSL
Exhibit 3: Jewelry grammage grew 37% in 4QFY17
Jewelry volume growth (%)
67
75
9
(4)
(21)
(2)
(24)
25
(11)
(10)(10)
28
37
15
6
(32)
4
Exhibit 4: Watches volumes also grew by 12% YoY
Watches volume growth (%)
9
(10)
3
(22)
(10)
11
9
(4)
(6) (4)
0
0
(19)
1
(9)
4
12
Source: Company, MOSL
Source: Company, MOSL
12 May 2016
2

Titan Company
Exhibit 5: Jewelry: Key operating parameters
Jewelry
Volume Gr (%)
Customer Gr (%)
Studded Share (%)
Sales Gr (%)
4Q14
(2)
3
37
4
1Q15
(24)
(16)
25
(10)
2Q15
75
97
35
63
3Q15
25
8
26
11
4Q15
(11)
(7)
37
(15)
1Q16
(10)
NA
29
(11)
2Q16
(10)
NA
24
(32)
3Q16
28
NA
25
20
4Q16
15
NA
34
1
1Q17
6
NA
24
3
2Q17
(32)
NA
42
0
3Q17
4
NA
21
15
4Q17
37
NA
30
55
Source: Company, MOSL
Exhibit 6: Tanishq posted LTL retail sales growth of 52%
Jewelery
Sales Gr %
LTL Growth %
Stores
35
30
188
3QFY16
(9)
(9)
33
(1)
(5)
195
4QFY16
(16)
(16)
32
9
3
199
1QFY17
(5)
(1)
30
9
4
200
2QFY17
(10)
(7)
29
20
15
204
3QFY17
GoldPlus
2
8
29
4QFY17
Tanishq
55
52
239
Tanishq GoldPlus Tanishq GoldPlus Tanishq GoldPlus Tanishq GoldPlus Tanishq
Source: Company, MOSL
Exhibit 7: Watches segment sales grew by 10.8% YoY
Watches
Gr %
World of Titan
Helios
Fastrack
LFS - Watches
Sales Gr (%)
Net sales INR b
4QFY16
Sales Growth LTL Growth
(6)
(9)
12
15
2
(5)
1
(7)
(13.0)
4.4
3QFY17
Stores (x) Sales Growth LTL Growth
452
12
9
41
16
11
159
3
1
NA
28
13
5.1
5.1
4QFY17
Stores (x) Sales Growth LTL Growth
470
8
5
47
4
(3)
155
0
(1)
NA
12
3
10.8
5.0
Stores (x)
474
49
155
NA
Source: Company, MOSL
Exhibit 8: Titan Eye+: Sales grew 9% with LTL retail growth of 1%
Titan Eye+
Stores
Sales Growth (%)
LTL Growth (%)
3QFY15
341
22
9
4QFY15
366
14
0
1QFY16
384
20
13
2QFY16
398
15
1
3QFY16
399
7
(2)
4QFY16
404
18
7
1QFY17
405
9
(2)
2QFY17
413
10
4
3QFY17
428
10
4
4QFY17
448
9
1
Source: Company, MOSL
Con-call highlights
Overall financials
Sharp increase in A&P was up 40% in 4QFY17, but was due to low base. Full year
A&P was up by only 5% (in fact declining by 30 bp to 3.6%).
Part of the reason why A&P was high was some postponement of launches to
4QFY17 from 3QFY17.
Jewelry
New products doing well, new collections every quarter for 8 quarters now.
Perception after Demonetization and GST among customer is fear of less
organized players.
Grammage ticket size is also going up. Customer growth has also been decent.
Share of new customers is also increasing.
Wedding jewelry proportion was 20% in 1QFY17 targeting 40% by FY20.
FY18 focus on growth as well as cost.
Wedding jewelry increase, High value jewelry increase, network expansion,
market share expansion are all encouraging signs for growth.
12 May 2016
3

Titan Company
FY18 will pursue growth and maintain EBIT margins in jewelry. April also
witnessed double digits growth in jewelry.
Out of 29 Gold Plus stores 25 are likely to be converted in a few months.
No hedging gains in 4QFY17. Will have gains on this front in 1QFY17.
Carat Lane consolidated effective from 3
rd
August.
Favre Leuba and Carat Lane are not yet profitable.
Golden harvest INR 7b cash was 14% of sales in FY17.
Wedding jewelry is lower margin than jewelry. Pushing higher growth in high
value diamond jewelry.
Discounts meant that despite studded jewelry sales being similar YoY.
Watches and other businesses
Watches EBIT margins were down sharply because of advertising
Eyewear- Launched on line omni channel 15 days ago
Guidance
Tax rate will be 28-29% in FY18
Capex will be around INR 2b in FY18.
Valuation and view
There are minor adjustments to our FY18/FY19 EPS as higher tax rate guidance
offsets increase in EBITDA forecasts. Even as we expect respectable 13.7%
earnings CAGR over FY16-19E on a lower base and healthy contribution of GHS,
we see risks emanating from uncertain demand environment.
Valuations at 40.7x FY18E is rich. Maintain Neutral with revised target price of
INR420 (valued at 39x Dec’2018 EPS, 5% discount to 3-year average multiples).
New
Old
FY19E
172,957
15,739
10,784
FY18E
142,619
12,978
9,254
FY19E
164,011
14,925
10,499
Change (%)
FY18E
FY19E
3.2%
5.5%
2.0%
5.5%
-1.4%
2.7%
Source: Company, MOSL
Exhibit 9: Marginal change in FY18 and FY19 EPS estimates
FY18E
147,115
13,240
9,123
Sales
EBITDA
PAT
Exhibit 10: Titan
P/E (x)
60
45
30
15
0
30.3
12.1
PE (x)
Peak(x)
Avg(x)
52.3
Min(x)
45.4
Exhibit 11:
Titan P/E premium vs. Sensex
180
120
60
0
-60
Titan Company PE Relative to Sensex PE (%)
73.9
146.9
Source: Company, MOSL
Source: Company, MOSL
12 May 2016
4

Titan Company
Exhibit 12: Valuation Matrix of coverage universe
Company
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
P & G Hygiene
Page Industries
Parag Milk Foods
Pidilite Inds.
United Breweries
United Spirits
Retail
Jubilant Foodworks
Titan Company
Reco
Neutral
Buy
Buy
Neutral
Buy
Neutral
Sell
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Price
(INR)
1,168
3,697
1,007
278
1,130
1,909
5,251
978
277
376
312
6,852
7,789
14,767
248
755
850
2,135
992
501
Mkt Cap
(USD M)
17.4
6.9
4.3
7.6
4.0
10.1
3.4
32.9
51.9
1.1
6.3
10.3
3.9
2.6
0.3
6.0
3.5
4.8
1.0
6.9
EPS Growth YoY (%)
FY17 FY18E FY19E
8.7
3.0
-4.4
1.9
4.5
12.4
0.9
1.1
8.6
94.5
12.1
-1.6
11.5
12.9
-87.9
12.5
-5.4
71.2
-17.6
18.5
10.0
15.5
18.9
6.7
10.2
15.4
8.7
11.7
11.6
12.8
10.5
0.6
7.5
29.5
756.4
10.1
34.3
47.2
76.4
13.8
18.6
22.0
22.7
18.3
18.6
14.6
9.3
15.4
18.1
16.5
21.1
17.6
16.6
27.3
79.4
12.3
28.2
39.1
34.0
18.2
P/E (x)
EV/EBITDA (x)
ROE (%) Div. (%)
FY17 FY18E FY19E FY17 FY18E FY19E FY17
FY17
55.6
51.2
46.5
38.4
42.6
50.5
33.7
50.8
33.0
47.2
49.6
57.8
53.8
62.7
305.7
45.5
79.6
74.6
80.4
54.8
50.5
44.4
39.1
36.0
38.6
43.8
31.0
45.5
29.6
41.9
44.9
57.5
50.0
48.4
35.7
41.3
59.3
50.6
45.6
48.1
42.6
36.4
31.8
30.4
32.6
38.2
28.3
39.4
25.1
35.9
37.1
48.9
42.9
38.0
19.9
36.8
46.3
36.4
34.0
40.7
36.3
37.8
28.2
30.8
33.9
35.4
22.8
35.3
22.3
26.4
34.9
35.2
36.1
40.0
28.2
30.5
32.9
35.8
25.5
36.9
32.7
32.4
23.5
29.3
29.6
30.5
21.2
32.0
19.8
24.1
31.6
34.1
31.7
30.7
15.4
26.9
29.2
28.6
17.3
32.4
27.5
25.6
19.3
24.6
24.9
26.8
18.8
27.7
16.5
21.4
26.4
28.9
26.7
24.3
10.5
23.6
23.0
22.2
13.2
27.2
28.5
43.1
54.9
28.4
35.8
24.6
22.2
67.6
28.4
16.4
36.7
39.0
45.3
41.3
1.3
27.9
12.6
20.8
10.1
20.6
1.0
0.7
1.5
0.9
0.6
0.6
1.0
1.9
1.9
1.1
1.0
0.9
4.7
0.7
0.0
0.6
0.1
0.0
0.3
0.5
Note: For Nestle FY16 means CY15
Source: Company, MOSL
12 May 2016
5

Titan Company
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Other Income - Recurring
Profit before Taxes
Change (%)
Margin (%)
Tax
Tax Rate (%)
Profit after Taxes
Change (%)
Margin (%)
Reported PAT
FY14
2014
109,158
7.9
98,673
10,484
3.6
9.6
656
871
1,202
10,159
0.9
9.3
2,761
27.0
7,411
2.1
6.8
7,411
2015
119,032
9.0
107,498
11,534
10.0
9.7
874
807
706
10,559
3.9
8.9
2,410
22.0
8,231
11.1
6.9
8,231
2016
112,759
-5.3
103,412
9,347
-19.0
8.3
982
424
739
8,681
-17.8
7.7
1,710
22.1
6,765
-17.8
6.0
6,765
2017
129,789
15.1
118,234
11,555
23.6
8.9
1,105
377
705
10,777
24.1
8.3
3,021
25.6
8,017
18.5
6.2
6,990
2018E
147,115
13.3
133,875
13,240
14.6
9.0
1,196
437
775
12,382
14.9
8.4
3,363
26.3
9,123
13.8
6.2
9,123
(INR Million)
2019E
172,957
17.6
157,218
15,739
18.9
9.1
1,340
465
892
14,826
19.7
8.6
4,171
27.3
10,784
18.2
6.2
10,784
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Tax
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Intangibles
Capital WIP
Investments
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Current Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2014
888
24,352
25,240
8,063
-93
33,209
10,399
4,495
5,903
59
329
230
54,456
38,672
1,520
8,925
5,338
27,768
23,938
3,830
26,688
33,209
0
2015
888
30,032
30,920
998
-197
31,721
11,902
5,103
6,799
34
549
290
50,854
40,474
1,874
2,138
6,368
26,804
22,483
4,322
24,050
31,721
0
2016
888
34,454
35,342
1,131
-239
36,233
14,227
6,085
8,142
34
540
290
50,734
40,993
1,785
2,274
5,682
23,506
19,501
4,005
27,228
36,233
0
2017
888
41,436
42,324
0
-33
42,291
16,302
7,191
9,111
3,337
1,432
4,307
65,938
49,257
2,076
8,020
6,584
41,835
40,424
1,412
24,103
42,291
0
2018E
888
46,983
47,871
500
-137
48,234
18,377
8,387
9,990
3,337
1,432
4,307
69,558
53,455
2,264
6,527
7,312
40,391
37,762
2,629
29,167
48,234
0
(INR Million)
2019E
888
54,324
55,212
1,000
-266
55,946
20,452
9,727
10,725
3,337
1,432
4,307
78,997
60,231
2,661
7,903
8,201
42,853
39,749
3,104
36,144
55,946
0
12 May 2016
6

Titan Company
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
-863
-1,140
-1,143
2014
8.3
9.1
28.4
2.4
28.6
2015
9.3
10.3
34.8
2.8
29.9
2016
7.6
8.7
39.8
2.3
30.0
2017
9.0
10.3
47.7
2.7
30.0
2018E
10.3
11.4
53.9
3.1
30.0
2019E
12.1
13.4
62.2
3.6
30.0
59.2
54.4
4.0
41.8
17.4
0.5
53.3
48.2
3.7
37.9
14.2
0.6
64.9
56.7
3.9
46.8
12.4
0.5
54.8
48.1
3.3
36.9
10.4
0.5
48.1
43.4
2.9
32.4
9.2
0.6
40.7
37.0
2.5
27.2
8.0
0.7
33.0
30.5
45.7
5
3.3
29.3
27.3
31.7
6
3.8
20.4
20.9
21.1
6
3.1
20.6
21.1
25.2
6
3.1
20.2
20.9
27.5
6
3.1
20.9
21.4
26.8
6
3.1
0.3
0.0
0.0
0.0
0.0
0.0
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Deferred Revenue Exp.
Depreciation & Amort.
Interest Paid
Direct Taxes Paid
Incr in WC
CF from Operations
Extraordinary Income
Incr in FA
Free Cash Flow
Investments
CF from Invest.
Issue of Shares
Incr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2014
10,159
-1,202
0
656
871
2,761
14,588
-6,864
0
1,806
-8,670
44
-1,850
0
8,002
2,181
-453
6,274
-2,440
11,365
8,925
2015
10,559
-706
0
874
807
2,410
4,149
4,975
0
1,698
3,276
61
-1,759
0
-7,065
2,116
822
-10,003
-6,787
8,925
2,138
2016
8,681
-739
0
982
424
1,710
3,043
4,595
0
2,316
2,279
0
-2,316
0
133
2,458
-181
-2,144
135
2,138
2,273
2017
10,777
-705
0
1,105
377
3,021
-8,872
17,406
-1,027
6,271
10,108
4,017
-11,315
0
-1,131
2,030
-2,816
-344
5,746
2,274
8,020
2018E
12,382
-775
0
1,196
437
3,363
6,557
3,320
0
2,075
1,245
0
-2,075
0
500
2,405
833
-2,738
-1,493
8,020
6,527
(INR Million)
2019E
14,826
-892
0
1,340
465
4,171
5,601
5,967
0
2,075
3,892
0
-2,075
0
500
2,675
342
-2,517
1,376
6,527
7,903
12 May 2016
7

Titan Company
Corporate profile
Company description
Exhibit 1: Sensex rebased
Titan Industries (TTAN) is one of India's largest
specialty retailers. It is the market leader in
Watches and a pioneer in Branded Jewelry. The
company's economy segment watch, Sonata is the
largest selling watch in the country. TTAN entered
the branded jewelry segment in 1996 with the
brand and remains the largest player in this
segment.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
53.1
5.4
21.1
20.4
Dec-16
53.1
6.0
20.2
20.8
Mar-16
53.1
5.6
19.7
21.6
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Jhunjhunwala Rakesh Radheshyam
Matthews Pacific Tiger Fund
Life Insurance Corporation Of India
Dendana Investments (Mauritius) Limited
Jhunjhunwala Rekha Rakesh
% Holding
7.0
2.8
2.1
1.8
1.6
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
C V Sankar
Bhaskar Bhat
A R Rajaram
Designation
Chairman
Managing Director
Company Secretary
Exhibit 5: Directors
Name
C G Krishnadas Nair
Harish Bhat
Ireena Vittal
T K Balaji
N N Tata
Name
Das Narayan Das
Hema Ravichandar
T K Arun
Vinita Bali
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells
P S V & Associates
Type
Statutory
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
FY19
MOSL
forecast
9.0
10.3
12.1
Consensus
forecast
9.5
11.4
13.7
Variation (%)
-5.3
-9.8
-12.0
Source: Bloomberg
Source: Capitaline
12 May 2016
8

Titan Company
NOTES
12 May 2016
9

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Titan Company
Disclosure of Interest Statement
Analyst ownership of the stock
Served as an officer, director or employee -
TITAN CO
No
No
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10