[https://finception.in/stocks/titan/](https://finception.in/stocks/titan/
Good article available on net
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Another very nice article about Titan from Jatin Khemani- scuttlebutt on the company.
In gold businesss, the integrity/honesty is of utmost importance and thats what propels Titan compared to its peers.
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My experience matches word to word except what they offered me after melting my old gold ornament…it was much less than what they said first after checking through karatmeter.Karatmeter showed purity of 22 karat but when they melted checked specific gravity, they said purity was only 54%…I have to settle down with that much purity only as ornament was already melted…anyways they offered to return melted gold and to check purity at any lab…otherwise excellent experience…gave detailed bill with purity certificate…
Disc. Invested
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Can someone tell me why Titan PE ratio is 70+ which is extraordinarily high. what makes this stock so special and why market is offering such a huge valuations.
I can take a shot. I think there is one aspect of any business which investors underappreciate and that is the runway for growth. Titan has a huge runway for growth ahead of them. I dont see people stop purchasing jewelry in the foreseeable future, especially in India.
In particular, Titan should continue to grow at rates higher than the rate of growth of the overall industry because of their brand strength, unorganized to organized movement etc.
The business is highly profitable with return on equity of ~30% over the last 10 years with minimal leverage.
The management has delivered in the past and by all accounts has done a good job.
So, here we have a business with a solid competitive advantage which will get better with time, excellent growth prospects and a credible management. That is an explosive combination and i cannot think of many companies in India with all of those characteristics.
Due to scarcity of such businesses, investors seem to have bid up the price to these levels, which may seem and probably is unreasonably high.
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Agree, with projected growth rate they will be able to double profits in 3 years.
[quote=“gurramlokesh, post:1, topic:20164”]
I feel it is hard to compete with online players like Lenskart
[/quote] is Lenskart a significant player and making good profits? Titan is not great and Lenskart is insignificant…a discount low quality player…that’s what I feel as a consumer…
True but we need to worry about management capability…that’s what worrying me in Tata global as holding since many years…luckily in case of Titan they were in better business in Indian context since few decades…
Infact I have already seen millennials reducing jewellery purchase if not totally stopped pure gold affinity…if they buy it’s because of parents influence…which in years to come will only reduce.
But having said above …if they will buy and when they will buy it will be of high per capita value and will be only from Tanishq…
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A beautiful interview with Shri BHASKAR BHAT.
worth watching.
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HDFC Securities report on Q1 FY20.
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According to World Gold Council, every 1% increase in gold price results in 0.5% drop in purchase (based on data collated in the last 2 decades). By this token, expect Titan to show sharp drop in purchase of jewellery in this quarter. I have been speaking to a few jewelers who have admitted to sharp drop in purchases.
Came across this article which seems to support this thesis.
Traditionally, Gujaratis and Marwaris tend to purchase high ticket gold jewellery ahead of the festive season. I would be surprised if they would splurge this time around considering the overall gloom. It would be difficult to justify high multiples in Titan in the face of falling sales and presumably high cost of retail operations.
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As Gold crosses all the limits it definitely dent the profit and sales of Titan I believe.
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Even after 16% drop from the high (CMP-1124), Titan looks over-valued. I calculated past 9 years cash flow (FY11-FY19):
Total Profit = ~ 7300 cr
Depreciation = ~ 800 cr
Changes in working capital = ~ –2900 cr
So, OCF comes to arnd 5200 cr. CAPEX is arnd 2200 cr.
So, Free Cash Flow is arnd just 3000 cr. Dividend given = ~ 2000 cr. Remaining ~ 1000 cr in Cash & Investments. So, a company which has 1 lakh crore market cap has made just 3000 cr free cash flow in the past 9 years. Even if we assume it can may 1000 cr FCF yearly with 25% growth, 1 lakh crore market cap looks very high.
Note :- I calculated “Gold on Loan” under Current Liabilities as it is a short-term bank loan. If I had considered this “Gold on Loan” (2352.90 cr as on Mar’19 payable to banks) under Debt, FCF would be much lower.
A nation of 135 Cr people and still only one Titan. Add to that the trust factors after Mehul Choksi, Nirav modi, winsome wtc. That’s why it’s expensive. It will remain so
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Can you please try and calculate for last 5 years? from FY15 to FY19?
In 2013 RBI restricted gold on lease and it resulted in Jewellers taking lot of debt on balance sheet. Titan used to work with negative working capital before this. So comparing pre FY14 will optically deteriorate data.
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Past 5 years :- OCF = 4000 cr: CAPEX = 1630 cr; FCF = 2370 cr; As you said, last 5 years data looks better than past 9 years. But, still it looks highly over-valued imho. Hope it helps.
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Thanks a lot for calculating this. The business model itself changed after FY14. So we should consider this data. Titan is expensive no doubt. The management has target of 50k cr sales by 2023. Even if they achieve 40k cr, It’s 18% growth. Market is satisfied if they do that. And Titan was never cheap for last 15 years. I think even in 2008 carnage it was at 45-50 PE at it’s low.
Disc - Biased views as invested in Titan.
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