Titan Industries - Fundamental Call - Consortium

Titan management meeting - Key takeaways:

- Management indicated festive season sales were good, however, retail sales post the festive season are not as buoyant as consumer spends still remain weak. It expects jewellery volumes to be positive in the coming quarters against the steep decline witnessed in 1HFY13, partially due to a low base and impact of restocking by franchisees.

- Margins in jewellery will be higher (YoY) on account of excise duty withdrawal and change in commission structure to franchisees (L2+L3 franchisees). However, the benefit of direct import of gold is delayed, as the company has still not resumed gold imports due to the 90 days credit period for imports as against the 180 days gold lease period. The company is discussing this issue with the authorities and is hopeful of a positive outcome.

- The company has added close to 0.12 mn sq ft so far in jewellery and remains confident of achieving its target of 0.2 mn sq ft by year end. Large part of expansion is in existing towns in order to strengthen its position and gain a higher share from unorganised players.

- Fastrack and Helios are being expanded rapidly while the company plans to extend Mia, jewellery for working women, in departmental stores through shop-inshops and kiosks.

- Titan remains our preferred pick: Post a weak first half performance with jewellery volume decline of +10%, management comments of a likely positive volume growth in jewellery in 2HFY13, albeit on a low base, looks encouraging. Though consumer spends post festive season are not as buoyant, we believe the worst is behind us and expect Titan to report an improved performance in the coming quarters. While we maintain our estimates factoring 22% earnings CAGR, we believe pick-up in consumer spends along with Titan's strong store expansion could drive upsides in future. We maintain Buy rating with a target price of Rs 330.

Source : Equity Bulls

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