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TITAN INDS: Mgmt meet update; Watches to sustain 20% sales CAGR; Aiming for double-digit jewelry EBIT margins by 2013



Watch sales are expected to grow at 20% CAGR; EBIT margins are expected to sustain at least around current levels of 16%. 

The company has plans to add 60-70 stores of World of Titan and 30 stores of Helios during the current year. 

For FY11, sales increased 23.3% to Rs.12.7b, EBIT increased 14.4% to Rs.1.9b, EBIT margins contracted 120bp to 14.7% due to the fall in Q4 EBIT margins. 

Consumer demand remains strong despite gradual increase in gold prices. Management is aiming for double-digit EBIT margins in this business in another couple of years from FY11 levels of 8.7%. 

In FY11, PE and Eyewear reported 90% increase in sales to Rs.788m with EBIT loss reducing from Rs129m to Rs.89m.


 Titan remains one of the best retail plays due to strong brands, leadership in watches, branded jewelry and sunglasses, and strong cash flows. We expect 33% PAT CAGR over FY11-13 which factors in 160bp margin expansion. However valuations at 32x FY12E EPS of Rs.136.3 and 25x FY13E EPS of Rs.173.6 leave little scope for any disappointment.