They are diversifying into different segments, and want to become more of a lifestyle brand, than restricting being just a jewellery brand. And over time, they could very well become one, just like they became a jewellery brand from a watch brand.
Are you saying appear or appeal?
Their offerings in sarees cater to urban premium customers, they have a dedicated website to Taneira, and they are active on social networking sites, promoting their new launches, and the response is good. And these responses might be helping sales, as sales are growing, so from the looks of it, the brand is visible and reaching their intended customers.
Urban premium folk too have a lot of choices, but if Titan becomes on go-to brand among others, then they will have a place in all the segments they present in. Of course, as these being lifestyle segments, constant innovation, promotion and execution should happen, and there will be some effect from time to time on one or all of the segments.
Just some views, and have a position.
Trying to become India’s LVMH.
One point i didnot get…1 lakh company means what? They are already 3 lakh market cap…and if it meant sales, they are already near 50,000 cr sales, so in 5 years ,just doubling the sales??? I m confused.
It is revenue. At this base they can’t grow faster. That is 15% CAGR.
If thats the case ( they will grow at 15% CAGR) then investing at current PE above 90, is it risky?
I wouldn’t invest personally at these valuations. But great companies keep throwing positive surprises.
Also, I think relative valuations are in play. When many cable making and electrical goods making companies are trading at north of 50 PE and larger ones have mcap of close to 1 lakh crore, Titan doesn’t appear very expensive.
Yes, I am still surprised by the valuations of whole lot of companies in the market. I always feel that the valuations are superficial. I always find it hard to digest the valuations of companies like Apple, but it kept on pushing the limits and surprised me. I still cannot fathom how can one comfortably take new positions at those absurd market caps.
Can anyone explain how the current valuations are justified?
I did a bull, bear and neutral case analysis and the future returns look abysmal.
Sales growth can be at 25% CAGR instead of 15% as has been in last 3 to 5 years and median PE has been at 85 in last 5 years. So these factors should be your neutral workings and Bull workings will be much above that. Also you are ignoring some new verticals in apparels and current exclusive 10 lakhs ticket size shops might pick up, which can go beyond these calculations.
My past experience with Titan’s watches was - they go on and on, never failing you. Ultimately, you grow tired of the damn thing and just give it away.
But my recent experience with Titan has shaken my faith in the company’s watch products. I purchased a wall clock from their store on M G Road, Pune about 18 months ago. Pretty sleek looking and although the price was Rs. 4500, I never considered cheaper alternatives from Morbi, Gujarat companies. About a year later the battery of the wall clock ran out and when I took it off the wall, to replace the battery, I noticed that there were air bubbles in 2 spots, on the clock dial. I took the watch to the dealer for replacement of the dial but was shocked to hear that Titan imports the clocks from China, and hence a dial replacement was not possible. Also as 1 year warranty had lapsed, the company was not liable.
The questions that arose in my mind were:
- how many of Titan’s products are just branded Titan and marketed by the Co?
- every large company outsources part/all of its manufacturing, but there is something called QC. Has Titan slackened on that front?
Some months later I read that Titan paid a whopping Rs. 4621 crore for acquiring an additional 27% stake in Caratlane(it already owned 71%). I believe that was expensive.
With this personal experience and belief, I have removed Titan stock, from my aspirational buy list.
Both are flawed ways to analyze a stock.
1.Your -ve personal experience with a product which is not even 0.01% of sales (Wall cock). This product is just to complete the portfolio. Even Seiko clocks at 5x price is also made in China.
2. Amount paid for Caratelane. Management has explained it well. It seems to be fair.
You have to look at Tiffany and Co to get a perspective of valuations. I guess LVMH paid close to 55 times earnings at 16B USD valuation.
For Titan growth can be close to 20%. Also margins with expand. Looks at Zoya. This range is not merely Gold price + making charges. Also they are targeting stores with minimum ticket size of 10 lakhs.
My take is that market is factoring in 20% growth with expanded margins.
I was not trying to analyze the stock. I have always believed that it does not deserve the sky high PE. Now as well as in the past. What I do know from first-hand experience is for a B2C company, consistent quality of all its products, especially when they are sold under the flagship brand name, is paramount to its survival and growth. The % share of a product in total sales is irrelevant.
As far as Caratlane purchase consideration goes, my comment is, shareholders and the market gives a long rope to its darlings. How many minority shareholders go through the trouble of voting on resolutions?