Titan Industries Ltd

Oct 22, 2013 No Comments by

Sector – Accessories
Market Cap – Rs 20,618.83 Cr
Sales Turnover in June 2013 – Rs 3087.79 Cr
Profit in June 2013 – Rs 182.48 Cr

 

COMPANY PROFILE­

Titan Industries Limited is an Indian designer and manufacturer of watches, jewelry, precision engineering components and other accessories including sunglasses, wallets, bags and belts. Their brands include Titan, Fastrack, Sonata, Nebula, Raga, Edge, Steel, Regalia, Octane, Xylys, Eye+ and Tanishq. Titan is the world’s fifth largest wrist watch manufacturer and exports watches to nearly 40 countries around the world.

FUNDAMENTAL VIEWS

The net profits of the company for the quarter ending June 2013 was reported at Rs.182 crores as compared to Rs.156 crores during the same quarter last year. The net sale of the company as on June 2013 was reported at Rs.3087 crores as compared to Rs.2205.42 crores during the same quarter a year back.

Tanishq, India’s largest and the fastest growing jewelry brand in India could face few hurdles in the short run due to policy changes caused by the RBI to curb gold imports. The company’s stock fell by 23% in two days after RBI made the policy announcement, but it later bounced back on the third day gaining 5%. The policy which is likely reverse in the next year or two based on whether the current account deficit comes under control. However in the short run there will be corrections in the stock price of the company.

As per the new policy the jewellers will not be allowed to lease and sell gold. They will have to pay for the gold upfront which will require them to have sufficient cash reserves and also will increase their working capital requirements.

 As we saw earlier the change in policy with respect to curb gold imports by the RBI will affect the share price of the company in the short term, however officials believe that the policy is likely to reverse in a year or two once the current account deficit comes under control. Titan has a strong balance sheet with very less debts and having a healthy cash reserve of Rs 1876 crores which gives it a huge edge compared to the other jewelers in capturing and increasing its market share at a faster pace.

Among its key businesses, jewellery (Tanishq) income rose 15 percent to Rs.8,108 crores behind its competetors Rajesh Exports and Gitanjali Gems and watches sales were up 10 percent to Rs 1,676 crore in FY12.

Other business, which includes eyewear, accessories and precision engineering, saw sales increase 26 percent to Rs 414 crore in the same period.

The Tata Group entity, Titan, plans to take the total number of exclusive outlets to 300 by open an additional 30 stores across the country.

The company has also planned expansion programmes for its jewellery, watches and eyewear divisions. They also plan to enter the US market with ‘Tanishq’ brand of jewellery. It currently has presence in about 30 countries across the world. The Company achieved exports of Rs.197 crores during the year under review comprising watches and precision engineered components; registering a growth of 23% over the previous year.

Total jewellery demand was up 12% year-on-year in Q1 2013, driven in the main by Asian markets. Demand in India was up 15%

Demand for gold in India was also driven by an increase in bar and coin sales –up by 52% in India year-on-year. Indians are gold lovers. Gold forms an integral part of marriages and other traditions. So, the demand for gold is unlikely to go down. RBI has increased the import duty on gold to 10%. This won’t affect the margins as this cost is directly passed on to the customers. The company has very less debt. It paid Rs 17 crore as the debt cost this quarter up from Rs 14 crore in the last quarter. So, the rupee depreciation has not affected the interest cost.

The above analysis gives us strong reason to believe that Titan is a fundamentally sound company. It is trading at Rs 240 levels. Given a long term perspective of a couple of years the prospect of the stock looks very bright. Investors can add this stock in their portfolio around Rs 230-240 levels.

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