Recommendation From Other Apparels & Accessories Sectors
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year
Titan Company
EMBELLISH YOUR PORTFOLIO WITH TITAN COMPANY
BSE Code: 500114
CMP: Rs 1040.30
FV: Rs 1
BSE Volume: 60731
HERE IS WHY
Positive performance across
segments Steady dividend growth
Promising outlook for Q4FY19
Titan Company Ltd. is a JV between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO). It operates across the segments of watches & accessories, jewellery, eyewear and others.
On the consolidated front, the total income from operations rose to Rs 5,871.49 crore in Q3FY19 from Rs 4,274.84 crore in Q3FY18, posting a growth of 37.34 per cent. The company reported EBITDA of Rs 591.20 crore in Q3FY19 as against Rs 422.42 crore in Q3FY18, registering a growth of 39.95 per cent. EBITDA margin stood at 10.06 per cent in Q3FY19 in comparison to 9.88 per cent in Q3FY18. Net profit rose to Rs 413.19 crore in Q3FY19 from Rs 287.96 crore in Q3FY18, posting a growth of 43.48 per cent. EPS climbed to Rs 4.65 in Q3FY19 from Rs 3.17 in Q3FY18.
The jewellery division emerged as the best performer for the quarter ended December 2018 as it reported the highest ever quarterly revenues of Rs 4,997 crore, posting a YoY growth of 37 per cent. Tanishq posted 27 per cent YoY sales growth with grammage growth of 19 per cent. The watches segment showcased 18 per cent YoY revenue growth to Rs 646.6 crore. The eyewear division too posted 43 per cent YoY revenue growth to Rs 129.5 crore. The EBIT margin for the jewellery segment expanded 290 bps YoY to 12.9 per cent as gross margins improved and the impact of positive operating leverage started to register. Contrarily, the EBIT margin for the watches segment halved to 6.8 per cent as the company incurred substantial marketing expenses.
The persistent retail network roll-out during the year has resulted in the retail network crossing the 2 million sq. ft. mark during the quarter. The company has made further provision of Rs 70 crore towards its investments in inter-corporate deposits in the IL&FS group, thereby bringing the cumulative provision to Rs 99 crore of the total exposure of Rs 145 crore. The company’s dividend has been growing at a 10-year CAGR of 23 per cent.
The management stressed that sales growth observed in January was a touch below their internal target (17 per cent to 18 per cent revenue growth) because of certain advancement of purchases during the company’s successful gold exchange programme that ended in December 2018. However, it anticipates a resilient revenue trajectory in March 2019 with an anticipated growth of 20 per cent to 22 per cent for Q4FY19. Furthermore, the management has maintained its revenue growth guidance of 22 per cent for FY19E. After experiencing five successive years of single digit revenue growth, the watches division witnessed a noteworthy improvement with approximately 17 per cent revenue growth for 9MFY19. While strong growth was seen across all channels; modern retail formats and e-commerce performed exceedingly well.
The company received institutional orders of Rs 200 crore during the quarter. Its balance sheet is virtually debt-free and is generating healthy return on capital employed (RoCE) of over 30 per cent. Moving forward, Titan’s aggressive foray into the wedding space is estimated to augment asset turnover and return ratios. By virtue of these factors, we recommend our reader-investors to BUY this stock.