ICICI Direct is bullish on Titan Company has recommended buy rating on the stock with a target price of Rs 1000 in its research report dated November 12, 2018.
ICICI Direct's research report on Titan Company
Titan reported revenue growth of 27.0% YoY to Rs 4567.2 crore (I-direct estimate: Rs 4160.2 crore) driven by robust growth across all divisions. The jewellery division reported robust revenue growth of 29% YoY to Rs 3645.1 crore despite muted growth seen by the industry (according to the management, industry grew 5-15%). The watches segment sustained its revenue trajectory with growth of 17.5% YoY to Rs 678.8 crore. Revenues from the eyewear division grew 19% YoY to Rs 120.0 crore Adjusting for exceptional expenses, EBITDA margins for the quarter declined marginally by 20 bps YoY to 11.6% (I-direct estimate 11.4%) mainly on account of higher advertisement expense (up 40% YoY to Rs 149.3 crore) and higher other expenses. Adjusted EBITDA grew 26% YoY to Rs 530.9 crore Titan has made provisions to the tune of Rs 29 crore as part of in inter corporate deposits in the IL&FS group. Also, the jewellery division has incurred one-time franchisee compensations (Rs 15 crore) on store takeover and inventory valuation loss of Rs 18 crore. Following the same, PAT for the quarter grew only 8% YoY to Rs 301.1 crore. Adjusted PAT grew ~29% YoY to Rs 357 crore.
We anticipate revenues and earnings will grow at a CAGR of 20% and 29%, respectively, for FY18-20E driven by sustained market share gains and aggressive foray towards enhancing its share in the wedding jewellery space (higher contribution from 35% in FY18 to 50% by FY23). We reiterate our BUY rating on the stock with a target price of Rs 1000.
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