Neutral on Titan Industries - Motilal Oswal

Titan Industries (TTAN IN; Mkt Cap USD3.4b, CMP Rs3,465, Neutral)

Consumer sentiment was buoyant in 3QFY11, helped by the festive and wedding season.

The inflationary environment has not affected demand for Titan's products as the customer segment it targets has not been much impacted.

Volume growth in watches and jewelry has been 25-30%. Margin improvement in watches was led by the launch of new collections at higher price points.

Eyewear store expansion is ahead of targets and the SBU is expected to end the year with 150 stores (135 earlier). Breakeven for the business is likely by FY13.

We expect the watches and jewelry business to maintain strong top-line growth in the coming quarters. Margin expansion will be lower due to higher store openings and ad spends. We are upgrading our FY11 estimates by 6% We estimate FY11 EPS at Rs104.3 (Rs97.8 earlier), FY12 EPS at Rs130.7 (Rs131.9 earlier) and FY13 EPS of Rs171.6. Although long-term prospects are encouraging, valuations are 26.5x FY12E and 20.2x FY13E. Maintain Neutral.

Source : Equity Bulls

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