Hold Titan Industries; target of Rs 380: Religare

Religare's research report on Titan Industries

TTAN’s gross margins contracted 120bps YoY to 23.8%. However, savings in other expenses (-120bps YoY), ad spends (-40bps) and staff costs (-20bps) drove EBITDA margins 60bps higher YoY to 9.6%. Thus, EBITDA grew 20.9% YoY (RCMLe: +17.6%) to Rs 3.7bn.

TTAN’s Q3FY17 net sales/EBITDA/adj. PAT grew 14%/21%/13% YoY. Jewellery sales were up 15.4% YoY with flattish EBIT margins while watches sales grew 5.1% YoY with 370bps EBIT margin expansion. Management stated than the Jan’17 sales trajectory continues to be healthy. We raise estimates but maintain HOLD with a Mar’18 TP of Rs 380 (Rs 350 earlier) as valuations at 37x/32x FY18E/FY19E EPS are fair and adequately factor in the inherent strength of TTAN’s franchise.