Buy Titan Company, target Rs 1,114: Prabhudas Lilladher

Prabhudas Lilladher has a buy call on Titan Company with a target price of Rs 1,114.

The current market price of Titan Company is Rs 920.50.

Time period given by the brokerage is one year when Titan Company price can reach the defined target.


Prabhudas Lilladher's view on the company:
Titan reported strong profit growth of 26 per cent despite significant disappointment in jewellery volumes as a better mix in jewellery, higher sales and margins in watches and income of surplus funds boosted profits.

TTAN has given cautiously optimistic outlook with 25 per cent jewellery sales growth for the balance of FY19 led by strong 70 per cent surge in July, upcoming festival season, the success of new collections like Gulnaaz and Lavanayam, benefits of a sustained increase in stores across Tanishq, Mia and Caratlane.

We expect Tanishq to achieve 22.2 per cent sales and 26.3 per cent EBIDTA CAGR over FY18-20 as growing store network, focus on high value studded and wedding jewellery will enable 80 bps expansion in margins. Watch business is likely to report improved growth (21 per cent GST adjusted sales growth) but 1Q margins of 18.8 per cent seem unsustainable due to skewed sales mix in favour of Titan brand and activation in 1Q.

Eyewear business remains in investment and customer acquisition mode, significant profitability improvement looks unlikely. We estimate 26.7 per cent PAT CAGR over FY18-FY20.

We value the stock at 45xSept20 EPS and arrive at a target price of Rs1114. Retain Buy.