ICICI Direct is bullish on Titan Company has recommended buy rating on the stock with a target price of Rs 1140 in its research report dated February 04, 2019.
ICICI Direct's research report on Titan Company
Titan Company reported a stellar performance with a strong beat across all parameters. The festive quarter turned out to be one of the best for the jewellery segment • Overall revenues grew 35% YoY to Rs 5871.5 crore (I-direct estimate: Rs 5239.4 crore). Supported by healthy festive season and successful exchange programme, the jewellery division reported robust revenue growth of 37% YoY to Rs 4997.0 crore (highest ever quarterly revenues). The watches segment sustained its revenue trajectory with growth of 18% YoY to Rs 646.6 crore. Revenues from eyewear division grew 43% YoY to Rs 129.5 crore • Adjusting for IL&FS provision (Rs 70 crore), EBITDA margins for the quarter improved significantly by 160 bps YoY to 11.3% (I-direct estimate 10.8%). On the segmental front, EBIT margin for jewellery segment expanded 290 bps YoY to 12.9% owing to higher gross margins coupled with positive operating leverage kicking in. EBIT margins for the watches segment halved to 6.8% owing to significant investment in marketing spends • Titan has made additional provision of Rs 70 crore (provided for Rs 29 crore in previous quarter) towards its investments in inter corporate deposits in the IL&FS group. Following the same, PAT grew 46% YoY to Rs 411.2 crore (I-direct estimate: Rs 377.4 crore). If adjusted for the same, PAT growth was at ~70% YoY to Rs 480 crore.
On YTD basis, Titan has reported a splendid performance across all its divisions with overall revenue growth of 24% YoY. The jewellery division continued to gain market share by capitalising on larger opportunities such as wedding space and high value diamond studded jewellery. Titan has a robust balance sheet with virtually debt free status and generating 30%+ RoCE. Factoring in the robust performance of Q3FY19, we tweak our estimates marginally upwards and pencil in revenues and earnings CAGR of 21% and 27%, respectively, for FY18-21E. We reiterate our BUY rating on the stock with a revised target price of Rs 1140 (44x FY21E EPS).