Titan Stock Analysis

Date: 8 January 2016

Price Rs. 340

View: Buy
Titan Company Limited (“Titan” or the “Company”) manufactures precious jewellery under the Tanishq brand name and is a market leader in the organized jewellery market with a market share of ~ 5%. The Company has done particularly well to eat into the market share of unorganized jewellery segment owing to: (i) years of deceitful practices adopted by jewelers; (ii) Titan’s authentication guarantee for pure gold/ diamond jewellery.

Titan’s product portfolio includes jewelry, watches and accessories in both contemporary and traditional designs. It is the world’s fifth largest wrist watch manufacturer and India’s leading producer of watches under various brands including the Titan, Fastrack, Sonata, Nebula, RAGA, Regalia, Octane & Xylys.

The Company has also made its foray into eyewear by launching Fastrack eyewear and sunglasses, as well as prescription eyewear and operates over 204 Titan Eye stores.

WHAT’S DRIVING THE STOCK

Titan Company’s Financial Position

The Company operates with ZERO DEBT

KEY FINANCIAL FIGURES

Entry into Smart Watches Category and Joint Venture with MontBlanc

In line with changing nature of watch segment, Titan has entered into partnership with HP to venture into smart watches like FITBIT, an area which is dominated by computer and mobile device firms like Apple, Motorola, Sony and Samsung.

The Company and global luxury firm Maison Montblanc have formed a joint venture whereby they are planning to open up to 50 stores over the next 5 years to sell Montblanc branded writing instruments (i.e. pens) that are typically priced between Rs. 25,000 upwards to Rs. 7,00,000. In addition the JV will also sell at its retail outlets Montblanc branded jewelry, wallets and bags. Initial investment of the JV is set at Rs. 250 Cr.

Jewellery Segment Continue to Lead

India is still a traditional market when it comes to gold & jewellery which continues to remain an integral part of Indian weddings. On the back of this, the jewellery segment continues to lead the revenue share for Titan, currently contributing around 80%. The Company is aggressively working towards maintaining this growth rate mainly on the back of new store and brand launches.

Factors to Boost Demand:

1. Increased discretionary spending in the middle & upper middle segment
2. increasing proportion of population in the working age group
3. Reduction in making charges to gain market share

Caters to All Market Segment With Strong Retail Presence

The Company’s bouquet of brands focuses on all market segment viz. luxury, premium, mid and mass market.

Segments	Watches	Jewellery	Eye Wear
Luxury		Zoya
Premium	Xylys, Nebula	Tanishq
Mid Market	Titan, Zoop, FastTrack	Tanishq, Mia	Titan, FastTrack
Mass Market	Sonata	GoldPlus	Eye+

Strong Retail Presence

As of 30^th November 2015, the Company had 1,246 exclusive stores.

Segments	Watch	Jewellery	Eye Wear
Luxury		Zoya (2)
Premium	Helios (41)	Tanishq (181)
Mid Market	World of Titan (434) FastTrack (157)		Titan Eye+ (398)
Mass Market		GoldPlus (33)

WHAT’S DRAGGING THE STOCK

Intense Competition

Titan faces huge competition in both watch and Jewellery category from organized and unorganized players. In the watch segment, Titan faces competition from brands like Fossil, Casio, most Swiss brands that are continuously expanding their retail presence.

In the jewellery space, Titan’s primary competitors includes PC Jewellers, Kalyan Jewellers , Gitanjali Gems. In addition, ecommerce websites with deep discounts are emerging as a formidable competition.

Permanent Account Number (PAN) card mandatory for jewellery purchases 

The existing rule mandates quoting PAN details for purchase of jewelry in excess of Rs 500, 000.

The government’s proposal to make PAN card mandatory for jewellery purchases above Rs 1 lakh in cash may lead to contraction in the sales of the jewellery companies.

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