TITAN
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+9.45 (+0.29%)
NSE Volume
6.2L+
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P&L Print reasonable; Capital base inching up! FY20 was all about soaring gold prices impacting fresh jewellery purchases. Demand unpredictability meant reliance on Gold loan reduced and focus increased on pushing sales via the capital heavy-gold exchange scheme. Note: While Jewellery biz’ sales grew 5.7% to Rs. 173.2bn, its capital employed ballooned to ~1.6x YoY to Rs. ~41bn in FY20 partly led by the shift to IND-AS 116. However, core cash conversion (CC) cycle (120 to 130 days) and capex has inched up too. FY21 is likely to follow the same capital-heavy template as gold exchange is revved up to salvage jewellery demand in the COVID19 era. Ergo, Return profile is likely to shrink at a time when cost of operations is likely to inch up (as the lower cost Gold Loan sourcing reduces in mix). We have cut our DCF-based TP by 17% to Rs. 900/sh (implying 49x F22 earnings), to factor in the demand destruction and its second order impact on the balance sheet. EBITDA cuts for FY21/22 are 24/22% respectively. We downgrade the stock to a REDUCE (Earlier ADD) given the uncertainty in demand recovery
BUY
BUY
Valuations – Maintain Buy with revised price target of Rs. 1,500: Titan’s jewellery business registered decent performance in the backdrop of a slowdown in discretionary environment and rising gold price scenario. The company continues to gain market share in the jewellery business that gives us an indication of a gradual shift from non-branded to branded jewellery. We have fine-tuned our earnings estimates to factor in better- than-expected OPM and higher-than-expected depreciation and tax expenses. In view of long term growth prospects and Titan being one of the strong retail plays, we maintain our Buy recommendation on the stock with a revised price target of Rs. 1,500 (valuing stock at 35x its FY2022E EV/EBIDTA).
BUY
Incorporating lower revenue growth for the year, and new corporate tax rate, we raise EPS forecasts for FY20E and FY21E by 2% and 6% respectively. Given challenging demand scenario and uncertainty over gold prices, we remain cautious on the stock and assign HOLD rating to the stock with a revised target price of Rs 1,232 using a target multiple of 51x P/E on FY21E adj. EPS.
BUY
Maintain Buy with an unchanged PT of Rs. 1,445: We have reduced our earnings estimates for FY2020 and FY2021 by 6% each to factor in lower- than-earlier estimated growth in the jewellery business and watches business. We have introduced FY2022 estimates through this note. Titan’s long-term growth prospects are intact, as shift from non-branded to the branded jewellery space and extending reach in middle income towns would help Titan gain market share in the near future. The company has maintained its store expansion strategy and is focused on launching innovative products in different business verticals. We maintain our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 1,445 (valuing at 35x its FY2022E EV/EBIDTA).
ACCUMULATE
View: Losing sheen. Downgrade to Accumulate.
Titan’s net revenue grew 14.4% YoY to `49.4bn in Q1FY20, below our estimate. We believe the growth in the jewellery segment will remain muted (low double digits) in Q2FY20E. Nevertheless, we anticipate an increase in growth in H2FY20E, due to new store additions, customer acquisition, and anticipated improvement in overall economy. Also, as Titan is one of the largest players in the organized industry, with attractive products, we believe it will emerge as a winner of the shift from unorganised to organised. Further, the trend of buying jewellery for fashion, instead of investment, will enhance premiumization. To factor in the below-expected earnings in Q1 and slowdown in Q2, we have revised our FY20E and FY21E EPS estimates downward to ` 19.5 (-8.7%) and `23.4 (-5.8%). We downgrade our rating to Accumulate, with TP of ` 1,172 (50x FY21E).
Titan’s net revenue grew 14.4% YoY to `49.4bn in Q1FY20, below our estimate. We believe the growth in the jewellery segment will remain muted (low double digits) in Q2FY20E. Nevertheless, we anticipate an increase in growth in H2FY20E, due to new store additions, customer acquisition, and anticipated improvement in overall economy. Also, as Titan is one of the largest players in the organized industry, with attractive products, we believe it will emerge as a winner of the shift from unorganised to organised. Further, the trend of buying jewellery for fashion, instead of investment, will enhance premiumization. To factor in the below-expected earnings in Q1 and slowdown in Q2, we have revised our FY20E and FY21E EPS estimates downward to ` 19.5 (-8.7%) and `23.4 (-5.8%). We downgrade our rating to Accumulate, with TP of ` 1,172 (50x FY21E).
BUY
We have trimmed our earnings estimates for FY2020 and FY2021 to factor in lower than earlier expected growth in the jewellery business and lower than earlier expected margins. The spike in the jewellery prices and slowdown in the consumption environment will affect the performance of the jewellery business in the near term but themanagement is confident in recovering the performance in H2FY2020. We expect Titan’s revenue and PAT to clock a CAGR of 16.5% and 17.5% over FY2019-21. The stock has corrected by ~22% from its recent high which has factored in the modest performance expected in FY2020. We expect growth to accelerate in FY2021. We maintain our Buy recommendation on the stock with revised price target of R.s 1,260 (valuing it at 37x its FY2021E EV/EBIDTA).
BUY
Given the recent headwinds, we revise our revenue and earnings estimates downwards for FY20, FY21E. A sustained increase in gold prices and weak consumer sentiments can lead to postponement of purchase, which may defer the revenue growth recovery in the near term. Titan has consistently displayed its ability to gain market share amid a tough industry scenario. Enriched jewellery portfolio with launch of new collections (wedding space) and sustained investment in brand building is enabling better than industry revenue growth. We model revenue and earnings CAGR of 17% and 24%, respectively, in FY19-21E. We maintain our BUY rating on the stock with a target price of Rs 1190 at 49.0x FY21E EPS (earlier target price of Rs 1250).
BUY
We believe that structural story led by consumer shift towards organized players, strong brand, growing store network and focus on high value studded and wedding jewellery is intact. We expected gradual recovery to set in from 3Q and expect Tanishq to achieve EBIT growth of 13.3% in FY20 and 28.5% in FY21. We expect watch business to show steady recovery with 14% EBIT CAGR over FY19-21 while Eyewear business will remain in investment mode. We estimate 23.5% PAT CAGR over FY19-21 and value the stock at 45xJune21 EPS. We advise Accumulating the stock in current weakness and retain BUY with a target price of Rs1173 (1264 earlier).
BUY
We expect the near term demand scenario to remain muted as consumers usually postpone demand in such a scenario. Structurally, we remain positive on the long term story of demand shift from unorganized to organized sector, huge scope in store expansion and wedding jewellery and high value diamond jewellery segments. We estimate 31.6% PAT CAGR over FY19-21 and value the stock at 45xFY21 arriving at a target price of 1267. Maintain Buy
BUY
Factoring in the Q1FY20 performance, we revise our revenue and earnings estimates marginally downwards but remain positive about the long term prospects. We continue to like the company given the healthy balance sheet (32%+ RoCE & virtually debt free status) and sustained market share gains driven by healthy store additions. Titan’s strong brand equity enables it tooutperform industry peers and deliver consistent earnings growth amid a challenging industry scenario. We model revenue, earnings CAGR of 18.4%, 26.7%, respectively, in FY18-21E. We reiterate our BUY rating on the stock with a revised target price of Rs 1250 (49.0x FY21E EPS).
BUY
Maintain Buy with a revised PT of Rs. 1,320:
We have reduced our earnings estimates by 7%/4%, respectively, for FY2020/ FY2021 to factor in lower-than-earlier estimated growth in the jewellery business and have tweaked our margins to factor in the change inrevenue mix. The jewellery division’s growth is expected to moderate to 15% in FY2020 (earlier expectation of ~19%). Other key divisionsare expected to deliver better performance with growth in mid-to-highteens in the near term. We maintain our Buy recommendation with a revised PT of Rs. 1,320 (in-line with reduction in earnings estimates).
We have reduced our earnings estimates by 7%/4%, respectively, for FY2020/ FY2021 to factor in lower-than-earlier estimated growth in the jewellery business and have tweaked our margins to factor in the change inrevenue mix. The jewellery division’s growth is expected to moderate to 15% in FY2020 (earlier expectation of ~19%). Other key divisionsare expected to deliver better performance with growth in mid-to-highteens in the near term. We maintain our Buy recommendation with a revised PT of Rs. 1,320 (in-line with reduction in earnings estimates).
BUY
We believe that TTAN’s high valuations are fully justified, given its (a) best top- line growth visibility in the large-cap FMCG/retail space (20% CAGR in Jewellery, the largest segment, over the next four years), (b) prospects of continued EBITDA margin improvement because of high SSSG contribution and (c) sustained RoCE improvement from ~26% in FY19 to 34% in FY21. In fact, increasing concerns over revenue/earnings growth of many consumer peers should also ensure high multiples for TTAN. We maintain Buy with a revised target price of INR1,500.
BUY
Maintain Buy with a revised PT of Rs. 1,375:
We have increased our earnings estimates by ~3% and 6% for FY2020 and FY2021, respectively, to factor in higher- than-earlier-expected growth in the jewellery business. Management expects the jewellery and watches segments to deliver double-digit revenue growth in the near term and eyewearbusiness is expected to improve profitabilitywith scale. Taneira (handloom saree) and Skinn (fragrances) are expected to be big opportunities in the long run and will be one of the keyrevenue and profitability drivers by FY2023.Caratlane, subsidiary of Titan, is expected to be EBIT positive in FY2020. We expect Titan’s revenue and earnings to report a CAGR of 18% and 23% over FY2019-FY2021. We maintain our Buy recommendation on the stock with a revised price target (PT) of Rs. 1,375 (in-line with increased earnings estimates).
We have increased our earnings estimates by ~3% and 6% for FY2020 and FY2021, respectively, to factor in higher- than-earlier-expected growth in the jewellery business. Management expects the jewellery and watches segments to deliver double-digit revenue growth in the near term and eyewearbusiness is expected to improve profitabilitywith scale. Taneira (handloom saree) and Skinn (fragrances) are expected to be big opportunities in the long run and will be one of the keyrevenue and profitability drivers by FY2023.Caratlane, subsidiary of Titan, is expected to be EBIT positive in FY2020. We expect Titan’s revenue and earnings to report a CAGR of 18% and 23% over FY2019-FY2021. We maintain our Buy recommendation on the stock with a revised price target (PT) of Rs. 1,375 (in-line with increased earnings estimates).
BUY
Due to the margin impact, resulting from higher anticipated store expansion (71 stores v/s 34 in FY19) and targeted sharp increase in exchange sales (up 35%) for the year, there is a slight reduction in FY20 EPS. But, due to better-than-expected targets for jewelry sales growth, there is a minor bump-up in FY21 EPS. For a business that has (a) the best top-line growth visibility in the large-cap FMCG/retail space (20% CAGR in jewelry, the largest segment, over the next four years); (b) prospects of continued EBITDA margins improvement because of high SSSG contribution and (c) sustained ROCE improvement from ~26% in FY19E to 34% in FY19, TTAN’s high valuations are fully justified. In fact, increasing doubts over topline and earnings growth of many consumer peers should also ensure high multiples for TTAN. Maintain Buy with TP of INR1,310 (targeting 50x FY21E EPS).
BUY
View: Robust revenue growth continues. Maintain Buy
The net revenue grew 19.3% YoY to ` 46.7bn, in line with our estimate. We believe the growth in jewellery segment will continue, despite an unfavorable base, due to new store additions and customer acquisition. Also, as Titan is one of the largest players in the organized industry with attractive products, we believe it will emerge as a winner of the shift from unorganised to organised. Further, the trend of buying jewellery for fashion, instead of investment, will enhance premiumization. We have revised our FY20E and FY21E EPS estimates upward to factor in increased demand. Maintain BUY, with TP of ` 1,245 (50x FY21E).
The net revenue grew 19.3% YoY to ` 46.7bn, in line with our estimate. We believe the growth in jewellery segment will continue, despite an unfavorable base, due to new store additions and customer acquisition. Also, as Titan is one of the largest players in the organized industry with attractive products, we believe it will emerge as a winner of the shift from unorganised to organised. Further, the trend of buying jewellery for fashion, instead of investment, will enhance premiumization. We have revised our FY20E and FY21E EPS estimates upward to factor in increased demand. Maintain BUY, with TP of ` 1,245 (50x FY21E).
BUY
We expect Tanishq to achieve 21.9% sales and 26.5% EBIDTA CAGR over FY18-21 as it gains from shift towards organized players led by strong brand, growing store network and focus on high value studded and wedding jewellery. We expect margins in watch business to improve further from 13% in FY19 led by sustained activations and new launches. Eyewear business has seen strong traction and is targeting to achieve 5mn customers in FY20, benefits of backward integration and scale should enable profitable growth by FY20. TTAN has now fully provided their Rs1.45bn exposure in IL&FS. We estimate 25.8% PAT CAGR over FY18-FY21. We value the stock at 45xFY21 EPS and arrive at a target price of Rs1264. Retain Buy.
BUY
Titan has consistently displayed its ability to gain market share amid a tough industry scenario. Robust balance sheet (30%+ RoCE and virtually debt free status) and asset light distribution model (A/TO: ~10x) has enabled it to outpace peers in terms of store addition. Enriched jewellery portfolio with launch of new collections (wedding space) and sustained investment in brand building is enabling better than industry revenue growth. We model revenue, earnings CAGR of 21%, 27% respectively, in FY18-21E. We reiterate our BUY rating on the stock with a revised target price of Rs 1290 (49.0x FY21E EPS).
BUY
According to the pre-quarterly update, Jewelry sales grew by ~22% after increasing by 25% in FY18, thereby exceeding the originally envisaged 20% five- year sales CAGR target for the second consecutive year. Interestingly, management’s confidence on further 20% overall sales growth in FY20 (stated in the 4QFY19 pre-quarterly release) – despite a muted economic outlook – is heartening. It indicates that not only are all segments firing well but also that Jewelry sales are targeted to grow even faster than overall sales growth. If achieved, it will be the third year of better-than-expected Jewelry sales. Despite opening a record 40 Tanishq stores (35 net), the emphasis on aggressive store expansion underlines management’s increasing confidence, even as the base and economic environment remain challenging. Jewelry growth prospects continue to be robust, and now Watches and even Eyewear have started contributing to growth. High valuations are fully deserved for a business that has perhaps the best top-line growth visibility in the large- cap FMCG/retail space. In addition, operating leverage arising from (a) the high contribution of SSSG to Jewelry sales growth and (b) the recovery in Watches margins are likely to lead to healthy EBITDA margin expansion, bettering the prospects of a best-of-breed and sustained earnings growth performance. There is no material change to our EPS forecasts. We maintain our Buy rating with a target price of INR1,300 (51x Mar’21E EPS, ~15% premium to three-year average P/E).
BUY
FY19 revenues grew by ~21% despite increase in gold prices and muted Jewellery demand. For 4Q19, we estimate 19.5% Jewellery sales growth and 13.5% volume growth led by sustained market share gains. We expect 11.3% sales growth in watches with 15% EBIT margin led by benefits of restructuring, higher activations and success of new launches. We remain positive on the long term structural story and estimate 25.8% Adj. PAT CAGR over FY19-21 to arrive at a target price of 1195 (45xDec20EPS). Maintain Buy.
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