Buy Titan Industries; target of Rs 255: Prabhudas Lilladher

“We interacted with the senior management of Titan Industries (TTAN). While conceding the near-term challenges, management is persisting with its medium-term expansion plans and focussing on bottom-line growth for FY13e. Government policy actions (customs duty, PAN card restriction) have started impacting TTAN, though not significantly. However, it is moderating the pace of shift from unorganised to organized segment, of which, Titan has been a key beneficiary so far. According to the management, absence of consumer demand in grammage terms, particularly in the last six months, has been slightly surprising despite the prevailing weak consumer sentiment.”  

“On its part, in order to induce consumer jewellery demand, TTAN is experimenting with an exchange scheme in some states and intends to roll it out on a bigger scale soon. Currently, exchange forms just 15% of the business and in the new scheme, it will accept even jewellery from other retailers with some carratage correction. As per management, it will help achieve twin objectives: a) restrict cash outflow for consumer and b) reduce overall Gold imports for the country. It may also contemplate a cut in labour charge to drive jewellery demand.”

“Titan will concentrate its efforts around Fastrack and Helios and will go easy on World of Titan expansion as it already has a geographically strong 350 store presence. Focus for FY13e has shifted to bottom-line growth by cost containment (wherever possible) and margin enhancement (direct Gold import will save 70bps). We maintain ‘buy’ with TP of Rs255,” says Prabhudas Lilladher research report.

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