Business Model:
Titan Company is one of India’s prominent lifestyle companies. It is a leading player in the Jewellery, Watches and Eyewear categories with several successful brands. It is the fifth largest integrated own brand watch manufacturer in the world.
The company’s Tanishq brand of jewellery is one of the most trusted and respected lifestlye brands in India. Titan also operates its eyewear business through its Titan eyeplus stores. Titan’s other popular brands include Fastrack, Sonata and Raaga. It recently entered the perfume business with Skinn and launched Taneira, a destination for fine silk sarees.
Competitive advantage:
Being the largest jewellery and watch company, Titan enjoys huge brand value and economies of scale. Being a tata company, it is able to raise funds at a lower cost as well as command a higher premium which makes it more profitable than most of its peers.
Financials:
Sales growth:
Annual Sales have increased from 13382 Cr in 2017 to 21644 Cr in 2021. The growth is generally consistent around 20-25% per annum. Last year growth was not great mainly due to covid which affected its gems and jewellery business.
EBITDA/ PAT Growth:
EBITDA has increased nearly 60% times from 2017 (1100 Cr) to 2021 (1700 Cr) It was higher in 2020 at 2400Cr (2021 being covid impacted year). PAT has increased in similar lines. Interest costs have have increased from 38Cr to 203Cr between 2017 and 2021. Interest costs as a percentage of EBITDA are not very high.
Margin:
The EBITDA margin increased from 8% to 12.5% between 2016 and 2020. PAT margin increased from 6% to 7% in the same period.
ROE: Increased from 20% to 24% from FY16 to FY20. FY21 ROE is 24%. ROE has been generally above 20% over the past 5 years.
ROCE: Constantly around 25%. ROCE has been generally above 20% across 5 years including the covid year.
Debt and coverage:
Debt to equity ratio has been constant around 0.35 across last 5 years despite large increase in stores. Interest coverage ratio is 14 whereas it was 39 in 2020 . The reduction in debt equity ratio is mainly driven by increase in equity value rather than reduction in debt.
Shareholding:
Promoters hold 53% stake and institutions hold 29% stake. Promoter stake has been constant. FII and DII stake have been slightly increasing.
Expensiveness: PE ratios:
Earning per share: Rs. 11 (was 17 in 20200, Share price : 1675; PE ratio = 152 (This reduces to 98 if we consider 2020 results); Price to book ratio = 20;
Industry average PE ratio is 83; Also historically the PE ratio has been between 65 and 80, hence the current PE ratio is much higher than historical averages. The company has strong fundamentals and is a very good investment though is currently expensive.
Dividend Yield : 0.24%
EV/ EBITDA is 32
