We recommend a SELL on TITAN due to reduced consumer spending on discretionary items which could sharply affect its profitability in H1FY21.

FY20 was challenging for Titan's jewellery division (Tanishq) due to a significant surge in gold prices (up ~31% YoY) & slowdown in discretionary spending. Despite dual headwinds, Tanishq continued to outperform the industry with sustained market share gains. In January-February, Tanishq reported a strong performance with revenue growth of ~16.5%. Diamond studded activation in January, healthy demand for wedding jewellery (~25% of revenues) aided performance of the division. However, owing to store closure in March, revenue for Q4FY20 contracted 5% YoY (vs. I-direct...

The Covid-19 crisis is expected to materially dent the performance of India's retail sector across all distribution channels. The gradual closure of malls and standalone stores from mid-March onwards to April 14 will negatively impact the performance in Q4FY20, Q1FY21. Shortage of workers owing to lockdown has led many of our universe companies to shut down their manufacturing facilities. Furthermore, sales through the e-commerce space have also been severely impacted (especially for non-discretionary) owing to several restrictions on delivery. Q4, on an average, contributes ~24% of...

Driven by festive season and good wedding season, we expect revenue growth to continue in Q4FY20. We maintain our HOLD rating on the stock, with a revised target price of Rs. 1,356 based on 50x FY22E EPS. Festive season drives topline growth Revenue grew 11.2% YoY to Rs. 6,527cr in Q3FY20, beating the street estimates by 2.7%, fueled by strong performance from Jewellery segment (+12.2% YoY, Rs. 5,606cr) amidst festive season and strong demand for wedding Jewellery. This is partially offset by declines in Watches segment (-2.2% YoY to Rs. 627cr) affected by weak consumer...

Titan Company Limited is an Indian consumer goods company. It is a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation. It commenced operations in 1984 under the name Titan Watches Limited. In 1994, Titan diversified into jewellery with Tanishq and subsequently into eyewear with Titan Eyeplus. In 2013, Titan entered the fragrances segment with the brand Skinn and, later that year, it ventured into the helmets category under its brand Fastrack. Also, Titan announced recently about launching a series...

While there is no questioning the execution skills of the outfit, its no See's Candy. >100% of the cumulative CFO (ex-working capital) goes towards working capital and capex needs. This acts as gravity to Titan's punchy valuations of 43x Dec-21E EPS. Peers too are expected to play catch up on the design and capital curve over the medium to long-term. Ergo, we largely maintain our FY21/FY22 estimates and our DCF-based TP of Rs. 1,170/sh (implying 42x Dec-21 P/E) While a reasonable wedding season keeps volume declines in check, fresh jewellery purchase (ex-wedding) remains challenged for most big-box jewelers (Per channel checks) given elevated gold prices. Hence, contextually, Titans 3Q performance seems reasonable. That said, growth has increasingly needed capital-heavy catalysts (aggressive gold exchange schemes) to entice consumers to shop, ergo gotten dearer. However, valuations continue to trade near peak. We maintain our FY21/FY22 EPS estimates and DCF-based TP of Rs 1170/sh (implied P/E of 42x Sept-21E EPS). Reiterate NEUTRAL.

We expect Titan to be a key beneficiary as India's gold market continues to strive towards regulation and standardisation (recent mandatory gold hallmarking). The company has consistently exhibited 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 have enabled it to outpace peers in terms of store addition. We build in revenue and earnings CAGR of 15% and 22%, respectively, in FY19-22E. The aim to double the market share (from 6% to 10%) over the longer term continues...

4 February 2020 While TTANs revenue growth was in line with the guidance, the positive surprise from the result was the jewelry margin of 13% and the EBITDA margin of 12%. Despite 15% retail jewelry YoY sales growth, TTAN has maintained its 2HFY20 guidance of 11-13% jewelry sales growth, considering Jan20 sales growth of only 8%. Recovery prospects in their largest segment, in which TTAN had reported 20%+ growth in FY18/FY19, are still unclear. Near term valuations are also fair leading us to maintain rating. 3QFY20 consolidated revenue grew 11.2% YoY to INR65.3b (v/s est. Adj. EBITDA increased 32.6% YoY to INR7.8b (v/s est. INR7b) while Adj. PBT grew 12.

Titan (TTAN) has reported a better-than-expected performance in 3QFY20. Its revenue was broadly in-line with the management revised guidance band at 11-13% YoY growth in 2HFY20 and it retained the same guidance for 4QFY20E as well. Revenue grew by 9.4% YoY (9MFY20 at +8% YoY) on the back of 10.6% YoY growth in jewellery segment and 2.4% YoY decline in watches segment. While wedding and festive season aided 15% YoY growth in retail jewellery sales, poor consumer sentiment affected Watches and Eyewear division. We are enthused by TTAN's market share gain during though times, not ruling out for its ability to grow >20% with improvement in consumer sentiment, going ahead. Consistent RoE of ~25% in the coming years and strong cash...

Watch business under pressures, trade channel will ease another 2/3 months We are cutting FY20, FY21 and FY22 EPS estimates by 2.9%, 4.9% and 7.4% following 1) tepid consumer demand following 20.6% higher gold prices 2) 5% decline in jewellery grammage despite 16% higher number of stores and 12% higher area and 3) trade issues in watch business and 4) sudden loss of...

Q2FY20 revenue rose 2.1% YoY to Rs. 4,662cr vs. 4,567cr in Q2FY19. Although the Jewellery business saw a subdued performance (revenue +0.1% YoY to Rs. 3,649cr), impacted by sudden increase in gold prices, the segment continued to gain market share with +7.2% YoY in 1H20. Revenue from the Watches segment increased 6.1% YoY to Rs. 720cr, yet the segment remained largely under pressure specially the EOB channel, world of titan and FastTrack struggled to perform. Eyewear revenue surged 28.5% YoY to Rs. 154cr on strong retail growth. Margin declines sharply in watches while flat in jewellery...

Titan Company Ltd. Report Q2FY20 financials, misses estimates Titan Company Ltd announced a growth in income of 0.6% for the second quarter. The income from operations in the second quarter, July to September 2019, was Rs.4435 crores, against last year's income of Rs.4407 crores during the same period. The income for April to September...

While there is no questioning the execution skills of the outfit, its no See's Candy. >100% of the cumulative CFO (ex-working capital) has gone towards working capital and capex needs. This acts as gravity to Titan's punchy valuations of 46x Sept-21E EPS. Peers too are expected to play catch up on the design and capital curve over the medium to long-term. Growth continues to elude most big-box jewellers in 2Q as the double whammy of gold price spurt and customs duty hike keep fresh jewellery purchases at bay. (Most de-grew by -5 to -15% in 2Q). Ergo, contextually, Titans 2Q performance seems reasonable. That said, street doesnt seem to have fully calibrated itself to growth pangs in the category (Jewellery) as Titan continues to trade near peak valuations. We largely maintain our FY20/FY21 EPS estimates and DCF based TP of Rs 1170/sh (implied P/E of 42x Sept-21E EPS). Reiterate NEUTRAL.

Market share gains sustain in tough macro environment Inflation in gold prices has severely dented consumer sentiments with footfalls declining in the festive season. As per the management, the jewellery industry declined ~10-15% in Q2FY20, signalling that Tanishq continued to gain market share in a challenging environment (with 7% retail sales growth in Q2FY20). In a bid to further strengthen its presence in nonmetro cities, the management has maintained its store addition plan of ~60 Tanishq stores for FY20E, despite slower pace of addition in H1FY20 (21 stores). While volatile gold prices may act as deterrent to revenue growth in...

Consol. 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%. Concall highlights: (1) Jewelry sales growth guided at 11-13% YoY for 2HFY20. (revised down from +20% previously). (2) INR1.2b impact on sales of hedging losses in 2Q would not be reversed but the incremental impact will be much...

Titan Company's (Titan) Q2FY2020 performance was affected by spike in gold prices during June, which affected jewellery sales in July. Consolidated revenue grew by just 2% to Rs. 4,600.7 crore, with revenue of the jewellery business declining by 2%, watches business revenue growing by 6% and eyewear business revenue growing by 28.5%. Revenue of the jewellery business included hedging impact of Rs. 120 crore, as the company purchased gold before spike in prices , which was hedged at lower price. Though customers were billed at transaction day gold rates, which were...

Given strong quarter and a positive outlook across all businesses, we maintain our ACCUMULATE rating on the stock with a target price of Rs. 1,167 based on ~51x FY21E adj. EPS. Revenue growth across all businesses Q1FY20 revenue rose 15.7% YoY to Rs. 5,151cr with strong performance across all businesses. Jewellery contributed the most to the overall revenue (+14.3% YoY to Rs. 4,164cr despite higher gold prices and 2.5% consumer duty imposed on gold). Watches segment revenue grew 20.1% YoY to Rs. 716cr primarily driven by large institutional...

estimates due to overseas investments and wage settlement Titan Company Limited reported a growth of 14.5% in topline during Ql of FY 2019-20. The sales income grew from Rs.4269 crores last year to Rs.4885 crores in Q1 FY20. The profit...

While there is no questioning the execution skills of the outfit, its no See's Candy as Titan operates in a put-up-more-to-earn-more' industry. The entire cumulative CFO (ex-working capital) has gone towards working capital and capex needs over FY14-19. All Plausible tailwinds baked. Our DCF bakes an 18%+ market share in jewellery in FY30 already! TTAN has corrected nearly 25% from its peak and it could well be on its way to more palatable valuations; the stock isn't there yet, though. We maintain our Neutral stance on the name. Growth hits a pit-stop. Back-ended expansion increases want from productivity increase if Titan has to scrape through its guided 22% growth This may be a stretch even for Titan given elevated gold prices and weak consumer sentiments. We have a DCF-based TP of Rs. 1020/sh.