Focus on high-end market likely to help the company boost margins. If there were an appropriate tagline for Titan on Wednesday, it would probably say: ‘We also make watches’. Even as the growth in its same-store watch sales continues to be in double digits, the company is fast evolving into a lifestyle company, with a sharp focus on premium accessories. While on the one hand it is planning to enter new categories in accessories like silver watches, on the other it plans to expand its existing footprint in the jewellery business with Tanishq
What will help the company beat the demand scenario is its focus on the wedding market. So far, it has targeted the Rs 30,000-50,000 bracket; but now, with its large-format stores, Tanishq plans to increase its same-store sales through selling higher grammage per square foot that can increase to offset decline in gold prices, if any. Analysts maintain the company is targeting sales of Rs 3,500 crore from watches by 2014-15, which will be driven by network expansion, introduction of new designs, as well as a shift towards the branded segment. Titan aspires to expand the category in eyewear and accessories (currently 177 stores) by getting into new sub-categories. A report by Prabhudas Lilladher says: “The company is targeting FY13 breakeven and believes potential margins can be higher than in watches. It intends to enter new lifestyle categories in the medium to long term.” What analysts like is the company’s shift in focus to high-end studded and gold jewellery and prescription-driven eyewear, not merely sunglasses. So far, the big concern has been expensive valuation. However, in this uncertain market, defensives continue to rule. Titan continues to remain the top pick of most brokerages. The stock is trading at 32.1x FY12 and 24.9x FY13 earnings per share. Performance : The scrip has given a great returns during last 2 years and is likely to out perform going forward. Short term investors can avoid the scrip.
Our Recommendation :
Long term investors should look to buy the scrip around Rs.180 levels and hold for a period 2-3 years for a return of more than 200% going forward. Though the scrip will move sideways owing to the higher liquidity (due to stock split and bonus given recently) After a period of consolidation the scrip will become ripe for next bull run after 6 months from now.
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Source Article for this post is from BusinessStandard.com
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Thursday, September 1, 2011
Titan Industries - Buy on declines
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