Initiate 'buy' on Titan Industries – TP Rs.337 - Geojit BNP Paribas

- Initiated 'buy' on Titan Industries with a target price of Rs.337 over one year. The stock is currently traded in the range of Rs. 275.

- Titan is the best play in the organized retail jewellery sector for its unmatched network, which is eight times higher than its next competitor; innovative product offerings and product offerings across price points.

- While the competition is rising, it will take many years to replicate Titan's network.

- This, along with 22% PAT CAGR over FY12-15 (expected) would support premium valuations.

- It is expected that strong traction in jewellery sales in FY14 led by space addition over FY11-13 and strong volume growth of 15%/ 18% in FY14 and FY15 (expected) as consumer sentiments revive.

- Revenue CAGR of 18% is expected over FY12-15 led by jewellery and supported by watches / eye wear.

- EBIT margin is expected to expand 120 bps to 11.3% over this period.

- The government aims to control India's current account deficit by curbing gold demand. Therefore, Titan's shares have underperformed the market recently.

- The bear case fair value is expected at Rs.243 for Titan, which suggest that the risk-reward ratio is turning favorable.

- The domestic jewellery market is estimated at USD 30- 37 billion, having grown at 13% per annum.

- Jewellery has historical cultural importance in India. Therefore, demand for gold is expected to remain intact in the long term, making jewellery a structural growth market.

- The organised market accounts for less than 10% of the overall market. Consumers are increasingly moving towards organised branded retailing, due to rising awareness on quality, hallmarking benefits and variety in designs.

- It is expected that Titan's share in the organised market is expected to increase given its strengths and positioning. The company offers a compelling growth story.

Source : Equity Bulls

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