Titan – Presents robust income progress; margins disappoint – HDFC Securities

Mr. Jay Gandhi, Institutional Analysis Analyst, HDFC Securities

Titan’s prime 4QFY21 line grew 59% year-over-year (on-line). That stated, Titan’s relative achieve in market share (in jewellery) doesn’t seem like important, as most large field jewelers have grown at a charge much like Titan estimated at 63% year-on-year (adj. for bullion / B2B gross sales). Jewelery margins stood at 10.7% (HSIE: 11.7%), because of a decrease income combine (increased bullion gross sales + decrease studded ratio) and a discount in customs duties available on the market. ‘gold. Non-jewelry recovered ~ 98% of its base income (INR 8.3 billion), however upset on profitability as a consequence of (1) higher e-comm and (2) gross sales decrease margin merchandise. We largely preserve our EPS estimates for FY 22/23 and our DCF-based worth goal of INR 1,300 / sh, or 50x F / E for FY 23.

Highlights of 4TFY21: Consolidated income elevated 59% year-on-year to INR 74.9 billion (HSIE: INR 75.4 billion). Jewellery grew 71% year-on-year to INR 66.8 billion. Adjusted for bullion / B2B gross sales, jewellery was up about 63% year-on-year (HSIE, Rs. 62.9 billion). The volumes / achievements are up 45/15% year-on-year resp. Invoices / ticket sizes / GHS registrations elevated to double digits. The studded ratio at 30% (vs. 37% at 4QFY20, HSIE: 32%) remained low. Jewelery EBIT margins stood at 10.7% (HSIE: 11.7%) because of (1) decrease income combine (increased bullion gross sales + decrease studded ratio) and (2) decrease tariffs on gold. Watches / eyewear grew 0/18% year-over-year (on-line). Nonetheless, the previous upset on profitability because of the courtesy of (1) higher e-comm and (2) gross sales of decrease margin merchandise (particularly moveable units). Adj’s consolidated EBIT margin fell 117 bps year-on-year to 9.7%. Adj. PAT elevated 66% year-on-year to INR 5.68 billion (HSIE: Rs 7.62 billion).

Outlook: Whereas the execution of Titan restoration (significantly in jewellery) has been on track, a powerful rebound in volumes is already anticipated in FY22 regardless of the impression of partial lockdowns from April to Could 21 in Maharashtra and Delhi. On this context, the margin of security appears nonexistent at 58x FY23 P / E. Subsequently, we largely preserve our SELL suggestion with a DCF primarily based TP of INR 1,300 / sh (implying 50x FY23 P / E) . EPS estimates for fiscal 12 months 22/23 stay unchanged.

Shares of Titan Firm Restricted have been final traded within the BSE at Rs 1,491.95 from the earlier shut of Rs. 1,506.3. The whole variety of shares traded through the day was 145,085 in additional than 8,312 transactions.

The inventory hit an intraday excessive of Rs. 1516.45 and an intraday low of 1471.6. The online turnover through the day was Rs. 216,749,658.

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