march 24, 2011 titan industries limited...

March 24, 2011

ICICIdirect.com | Equity Research

Initiating Coverage

ICICI Securities Limited

Riding the tide of discretionary spending… Favourable demographics like increased urbanisation, rising number of middle class households & working population and increased disposable income are expected to fuel discretionary spending. India is expected to see a shift towards discretionary spending, the share of which is expected to reach ~ 70% in 2025E from 52% in 2005. Titan Industries (TIL) is aptly positioned with product offerings to cater to discretionary spending in the lifestyle segments. With a strong distribution network (149 new stores expected in FY11E) and robust brand presence in India, we believe TIL is suitably placed to fulfil the rising aspirations of domestic consumers. We expect TIL’s revenues to grow at a CAGR of 28% to | 9,751 crore in FY10-13E driven by strong volume growth in the jewellery and watches segments. We are initiating coverage on the stock with an ADD rating.

Jewellery to remain key growth driver; other segments to aid growth TIL has ~40% market share in the domestic organised jewellery market. With a diverse product portfolio (catering to all income groups), trusted brand and expanded retail presence we believe TIL will be able to attract more customers from the domestic unorganised retail sector. We forecast volume and value growth of 13% CAGR in jewellery segment in FY10-13E and expect the jewellery segment to contribute ~75% to TIL’s topline. With the planned retail expansion we expect 21% and 54% (albeit on a small base) CAGR in the watches and eyewear segment, respectively, during FY10-13E.

Margin expansion and better working capital management We expect TIL’s EBITDA margins to improve by ~113 bps to 9.6% in FY10-13E driven by a diverse product portfolio, introduction of premium segment products, improvement in working capital and a decline in losses in the eyewear segment.

Valuation At the CMP of | 3487, the stock is trading at P/E of 32.2x in FY12E and 24.5x in FY13E. We expect TIL’s standalone revenues to grow at 28% CAGR to | 9,751 crore in FY10-FY13E driven by aggressive expansion plans in jewellery, watches and eyewear markets. We forecast margin accretion due to rising share of premium products in the overall product mix and decline in losses in the eyewear segment. We value the stock using DCF methodology and initiate coverage with an ADD rating.

Exhibit 1: Key financials (| Crore) FY09 FY10 FY11E FY12E FY13ETotal Revenues 3,804 4,675 6,277 7,657 9,751EBITDA 297 396 606 713 935Net Profit 159 250 431 480 632PE (x) 97.4 61.8 35.9 32.2 24.5Target PE (x) 101.2 64.3 37.3 33.5 25.5EV/EBITDA (x) 52.5 38.8 25.2 21.4 16.2P/BV (x) 28.1 21.4 15.4 11.4 8.5RoNW (x) 32.2 39.2 49.8 40.5 39.6RoCE (%) 36.0 44.0 59.9 52.4 51.5

Source: Company, ICICIdirect.com Research

Titan Industries Limited (TITIND) | 3487

Rating Matrix Rating : Add

Target : | 3624

Target Period : 12-15 months

Potential Upside : 4%

YoY Growth (%)

FY10 FY11E FY12E FY13ETotal Revenue 22.9 34.3 22.0 27.3EBITDA 33.0 53.2 17.6 31.2Net Profit 57.5 72.3 11.3 31.5

Current & Target Multiple (x) FY10 FY11E FY12E FY13E

PE 61.8 35.9 32.2 24.5EV/ EBITDA 38.8 25.2 21.4 16.2P/BV 21.4 15.4 11.4 8.5Target P/E 64.3 37.3 33.5 25.5Target Ev/ EBITDA 40.4 26.2 22.2 16.8Target P/BV 22.2 16.0 11.8 8.8

Stock Data

Bloomberg Code TTAN:IN

Reuters Code TITN:BO

Face Value (|) 10

Promoters Holding 53.4Market Cap (| cr) 15,47952 week H/L 4242 / 1766Sensex 18,351Average volumes 124,672 Comparative return matrix (%)

1m 3m 6m 12mTIL (0.46) 3.74 5.09 94.13 Pantaloon (1.96) (27.82) (45.80) (33.05)

Shoppers Stop 4.13 (4.82) 10.88 79.60

Rajesh Exports (18.12) (7.73) 15.04 4.74

Gitanjali Gems (9.25) 12.36 (8.65) 91.37

Price movement (Stock vs Nifty)

01000200030004000500060007000

Mar-10 Jun-10 Sep-10 Dec-10

0

1000

2000

3000

4000

5000

NIFTY Titan Industries Ltd

Analyst’s name Bharat Chhoda [email protected]

Dhvani Modi [email protected]



Company Background Titan Industries Ltd (TIL) is the pioneer in the speciality retail market in India with leadership position in watches, jewellery and eyewear retail segments. It was established in 1985 as a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO) to manufacture watches. Later, the company diversified into the jewellery (in 1995) and eyewear (2007) businesses. In FY10, the jewellery segment contributed 75% to total revenues, followed by the watches (22%), eyewear (2%) and precision engineering (1%) segments.

TIL is the world’s fifth largest integrated watch manufacturer with a market share of ~65% in the domestic organised watch market (customer base of ~80 million). The company has several popular brands in this segment including Titan, Sonata and Fastrack. Further, TIL enjoys ~40% share in the organised jewellery retailing market where the company offers gold and diamond jewellery through its popular brands - Tanishq, Gold Plus and Zoya. TIL also has a presence in the branded eyewear business. The company is present in the retail format in all three market segments with a total space of ~0.77 million square feet (msf). In 2005, TIL entered the precision engineering business and offers design services to companies operating in industries such as aerospace, automotive, oil exploration & production and machine building and automation business.

TIL’s manufacturing facilities are located in Aurangabad, Dadra, Hardwar, Piparia and Rakholi. The company has sales and marketing offices in the US, the UK, Russia, China, South Africa and India. The company is headquartered in Hosur, Tamil Nadu with staff strength of over 4,300.

Exhibit 2: Revenue mix

68 73 75 72 75 75

29 24 22 20 20 19

-

20

40

60

80

100

FY08 FY09 FY10 FY11E FY12E FY13E

%

Jewellery Watches Eyewear Others

Source: Company, ICICIdirect.com, Research

Exhibit 3: Segmental break-up

2,02

6

2,76

0

3,49

7

4,49

9

5,74

7

7,29

0

-

2,000

4,000

6,000

8,000

10,000

FY08 FY09 FY10 FY11E FY12E FY13E

| cr

ore

Jewellery Watches Eyewear Others

Source: Company, ICICIdirect.com, Research

TIL’s revenues grew impressively at 34% CAGR to | 4,675 crore in FY05-FY10 boosted by strong growth in the jewellery segment (46% CAGR). The robust growth in the jewellery segment was fuelled by the major expansion drive by the company (148 stores in Q3FY11 vs. 86 in FY05) and rise in gold prices (9% increase during FY10). On the other hand, the watches segment grew at 14% CAGR in FY05-10 driven by strong nationwide reach (316 stores in FY10 vs. 195 in FY05), large service network and robust portfolio of distinctive brands.

Share holding pattern (Q3FY11)

Shareholder Holding (%)

Promotors 53.4

FIIs 10.4

DIIs 8.6

General Public 27.6

Promoter & Institutional holding trend (%)

53 53 53 53

19 20 20 19

0102030405060

Q3FY11 Q2FY11 Q1FY11 Q4FY10

Promoters Institutional investors



Exhibit 4: Store details as of Q3FY11

Formats No. of Stores

Watches 342

World of Titan 303

Fastrack - Stores 27

Fastrack - Kiosks 10

Helios 2

Jewellery 148

Tanishq 117

Gold plus 29

Zoya 2

Titan Eye+ 122

Total 612


Exhibit 5: Like-to-like sales growth in 9MFY11

13

44 47

100

13

45 4638

0

25

50

75

100

World ofTitan

Tanishq TitanEye+

Fast track Gold Plus Helios Zoya Watches -Large

formats

(%)


Exhibit 6: Sales growth ( in value terms) of TIL’s major brands in 9MFY11

47

13

21

67

46

0

10

20

30

40

50

60

70

80

Tanishq Gold Plus Titan Titan Eye+ Zoya

(%)




Investment Rationale Increased discretionary spending to drive TIL’s growth

Increased share of discretionary items in households wallet

We believe that the discretionary spending in India will receive a significant boost primarily driven by expectation of robust economic growth (GDP growth at ~9% CAGR in FY10-15E according to Economic Intelligence Unit), the rapid rise in the middle class population and improving disposable income. According to McKinsey Global Institute (MGI), the average household disposable income in India is expected to grow at a 5% CAGR to | 319,518 in 2010-25E on the back of ~10 times rise in middle class households in 2025E (128 million vs. 13 million households in 2005).

In addition, India is blessed with favourable demographics as the share of working population in the total population is expected to reach ~68% in 2025E (vs. 63% in 2005), pushing household discretionary spending to ~70% of the total household spending in 2025E (vs. 52% in 2005). Also, the rapid rise in organised retail in the domestic market, which is expected to grow at a 35% CAGR to US$67 billion in CY10-CY14E as per Business Monitor International (BMI) estimates, provides credence to the consumption growth story in the country.

Exhibit 8: …driven by rapid pace of urbanisation…

40

2830

0

400

800

1,200

1,600

2001 2008 2030E

(Mill

ion)

0

11

22

33

44

(%)

Total population Urban Population

Urbanization rate - RHS

Source: MGI, ICICIdirect.com Research

Exhibit 9: …and rising number of middle class households

186 180 151

3185 148

23

82

0

75

150

225

300

375

2008 2020E 2030E

(Nos

in m

illion

)

Lower Class Middle Class Upper Class

Source: MGI, ICICIdirect.com Research; Classes are based income levels with the ‘Lower’ class representing income of <Rs 200,000 per annum; ‘Middle’ class between Rs 200,000 to Rs 1,000,000 per annum ; and ‘Upper’ class >Rs 1,000,000 per annum

The share of discretionary spending is expected to reach

~70% in 2025E (vs. 52% in 2005) on the back of strong

macroeconomic growth, favourable demographics and

rapid rise of organised retail

Exhibit 7: Household spending shifting from basic necessities to discretionary items…

4225

6

5

6

12

5

9

17 20

7 103 312 10

0

25

50

75

100

2005E* 2025F

(%)

Housing and utilities

Household products

Personal products and services

Transportation

Communication

Education and recreation

Wellness

Apparel

Food, beverages, and tobacco

Source: MGI, ICICIdirect.com Research, *Estimated, Household spending is in Indian rupees with 2000 as base year

Discretionary Spending

Necessities



In our view, TIL has one of the best exposures in the fast growing discretionary spending in India given its strong brand equity, leadership position in the lifestyle segments (such as watches, jewellery and eyewear) and improving geographical reach in Tier II and Tier III cities. Initially, TIL was targeting only upper middle class consumers. However, the acceptance of organised retail in the country and rising consumer confidence has helped the company to start catering to consumers in the mass and value segments. As a result, the company operates multiple retail formats that take care of specific requirements of consumers in different income groups.

In addition to the in-house brands, TIL stores provides access to popular international brands to its customers in the watches and eyewear segments. These products have higher-than-average margin profile and are typically targeted at premium consumers. We believe TIL will remain the key supplier of these international brands given its large footprint in the speciality retail market and strong brand equity. In our view, it will be difficult for any international retailer to replicate the distribution reach and create brand awareness on par with TIL in the near future.

Exhibit 10: Rising working population expected to push…

63 66 68

38 34 32

01020304050607080

2005 2015E 2025E

(%)

Working Population Dependents

Source: MGI, ICICIdirect.com Research, Working population: 15-64 years

Exhibit 11: … average disposable income at 5% CAGR in 2010-25E

113,744147,255

190,639

246,805

319,518

0

90,000

180,000

270,000

360,000

2005 2010 2015E 2020E 2025E

(|)

Source: MGI, ICICIdirect.com Research

With the robust distribution network, strong brand

awareness and presence in the mass market and premium

segment, TIL has one of the best exposures in

discretionary consumption in lifestyle segments

Exhibit 12: TIL- product portfolio Consumer Categories Retail Format Products

Watches

Mass World of Titan, Fast track Titan, Fastrack, Zoop

Value Sonata

Premium Helios Xylys, Nebula

Jewellery

Mass Tanishq

Value Goldplus

Premium Zoya

Eyewear

Mass Titan Eye+ Titan Eye+, Fastrack, Dash




Jewellery segment

Shift towards branded jewellery gaining momentum...

The Indian jewellery market is the largest in the world with an estimated size of ~US$19 billion (~| 90,000 crore) in FY10, as per World Gold Council (WGC) estimates. Historically, the country has accounted for ~25% of the total world gold demand driven by the strong association of gold jewellery in social customs (mostly in wedding and other special occasions) and aspirations of an average Indian family to own gold as an investment option. However, the domestic jewellery market is still dominated by neighbourhood jewellers (characterised by unorganised/unbranded market), which constitute ~94% of the total market while the branded segment constitutes the rest. Exhibit 14: Indian jewellery market to grow at a CAGR of 12% during FY10-16E

19

38

0

5

10

15

20

25

30

35

40

FY10 FY16E

$ bi

llion

Indian Jewellery Market

Domestic jewellery market to double by

FY16

Source: World Gold Council, ICICIdirect.com Research

The domestic jewellery market presents a significant growth opportunity as the total market size is expected to reach ~US$38 billion by FY16E (according to the World Gold Council) primarily driven by:

• Improved awareness among consumers, primarily young and educated people in the metros and Tier I cities, who have increasingly shown preference for branded jewellery due to the benchmarking of quality by jewellery retailers and availability of jewellery with contemporary designs

• Emergence of modern organised retail as a value proposition for the jewellery industry in terms of brand and fashion. Organised retailers also provide higher transparency and better after-sales services

In our view, the organised players in India will be the primary beneficiary of the rising opportunity in the domestic jewellery market as they are able to charge a premium from consumers by offering quality products and

Exhibit 13: TIL- International brands Segments International Brands

WatchesHugo Boss, fcukTM Tommy Hilfiger, Versace, Seiko, Movado, Citizen, Fossil, DKNY, Nina Ricci, Roberto Cavalli and Esprit

Eyewear Gucci, D&G, Armani, BOSS, Esprit, Daniel Swarowski and Mont Blanc


The Indian jewellery market is expected to grow to

~US$35-40 billion by FY16E driven by robust domestic

demand for gold jewellery and improving purchasing power

of the middle class population

The World Gold Council expects the Indian jewellery

market to grow from $19 billion in FY10 to $38 billion in

FY16E

The jewellery and watches segments present a strong

business proposition for players in the discretionary

consumption market due to the high margins associated

with these segments



services. On the other hand, the unorganised jewellery market in India is overcrowded (with the more than 300,000 players) and operates on very low margins.

With the strong business proposition attached to the domestic organised jewellery market, several players started their operations in the last decade such as Gitanjali Group (Gili, 1994), Tata Group (Tanishq, 1995), Sanghavi Exports (Sangini, JV with Gitanjali Group, 2004), Suhashish Diamonds (Ishi’s, 2003), Dhanraj Dhadda Group (Scintillating, 2003), Rosy Blue Group (Orra, 2004), Rajesh Exports (Shubh Laabh, 2006), etc. Further, major retail chains such as Lifestyle, Shoppers Stop, Big Bazaar and Pantaloons have also started jewellery sections in their stores in order to benefit from the rising consumer preference towards the organised retail market.

In our view, the demand for gold jewellery (constituting ~75-80% of the total gold demand) in the domestic market will remain strong in the next one or two quarters driven by the onset of the festive/marriage season in the country. Further, the easing of the liquidity crunch in the domestic market (after the economic slowdown in 2009-10) and rising discretionary spending from the middle class provides significant support to long-term jewellery demand in India.

Although jewellery demand is highly susceptible to a rise in gold prices due to deferral of purchases in a rising price environment, we have observed robust gold demand in 9MFY11. Despite a 25% increase in prices, domestic demand increased ~10% during the same period.

Exhibit 15: Jewellery and watches have higher margin profile vs. other items under discretionary spending

0

10

20

30

40

0 2 4 6 8 10 12 14

EBITDA (%)

RoCE

(%)

CDIT*

Food & GroceryApparel

Jewellery & Watches

Pharma & Wellness

Books & Music

HomeFootwear

Source: Technopak, ICICIdirect.com Research, Bubble size represents sales psf * - Consumer Durables & IT Products

Exhibit 16: Leading players in India have announced strong expansion plans in the next one or two years

Company Jewellery segment turnover

in FY10 (| Crore) Number of Outlets (FY10) Announced plans

TIL 3,498 145 stores Planning to add 16 Tanishq and 1 Gold plus stores in the next 2-3 years

Gitanjali Group 3,636485 owned stores, 185 franchises and

2000 shop in shop ~200 new franchise stores in FY11E

Rajesh Exports NA 26 stores Planning to increase total store strength to 350 in the next 1-2 years

Reliance Jewels NA 22 stores Planning to add 50 new stores in the next 1-2 years

Big Bazaar (Navras) NA 49 stores ~12-15 new Navras stores are expected to be added in FY11E




However, we remain cautious on the steep rise in gold prices, which is the key deterrent to demand growth for gold jewellery.

…expected to benefit TIL

TIL has the first mover advantage in the branded jewellery market and enjoys a market share of ~40%. The company has created a robust brand identity in the domestic jewellery market by guaranteeing the purity of its gold and improving its retail footprint (148 jewellery stores in 75 towns as on Q3FY11 vs. 86 in FY07). As a result, TIL has been successful in exploiting the low consumer trust in the unorganised gold jewellery market that is plagued by high prevalence of under karatage. With the benchmarking of jewellery quality and improving customer trust, the share of the jewellery segment in TIL’s total revenue increased to 75% in FY10 from 49% in FY05.

We believe TIL will be able to maintain its leadership position in the growing domestic gold jewellery market due to the following favourable reasons:

• Trusted brand presence primarily due to the association with the respected Tata group

• Continuous introduction of new collections in branded jewellery, which is increasingly being accepted as a fashion accessory

• Continuous design innovation on the back of robust in-house design capability

Additionally, TIL is strongly focused on expanding its presence by opening new stores, which, in our view, has been one of the key strategies of the management in improving its jewellery sales. During FY05-10, the company has added 50 new Tanishq stores primarily in Tier I and Tier II cities.

Further, TIL is also experimenting with large format stores in metros and Tier I cities. According to the management, the company has received an encouraging response from the 20,000 sq ft Tanishq store in Chennai that was opened in September 2009. TIL has also started focusing on rural and semi-urban areas (by opening Gold Plus stores). This represents an estimated jewellery market size of ~| 30,000 crore. In our view, TIL will be successful in establishing its presence in semi-urban and rural regions as this market is highly fragmented in nature with the high prevalence of under karatage.

Exhibit 17: Gold demand remains firm despite rising prices

0

70

140

210

280

350M

ar '0

5

Jun

'05

Sept

'05

Dec

'05

Mar

'06

Jun

'06

Sept

'06

Dec

'06

Mar

'07

Jun

'07

Sept

'07

Dec

'07

Mar

'08

Jun

'08

Sept

'08

Dec

'08

Mar

'09

Jun

'09

Sept

'09

Dec

'09*

Mar

'10*

Jun

'10*

Sept

'10*

Dec

'10*

(Ton

nes)

0

4,000

8,000

12,000

16,000

20,000

24,000

(|/1

0 gm

)

Domestic gold demand - LHS Gold Prices (|/10 gm) - RHS

Source: WGC, ICICIdirect.com Research,* Provisional demand (tonnes)

Strong brand equity, focus on purity of gold jewellery,

robust in-house design capability and rapid expansion

plans make TIL a formidable player in the domestic

organised jewellery market



With the significant initiatives from the management in terms of improvement in visibility and rising share of jewellery in overall discretionary spending of the middle class, we believe the share of jewellery segment revenues in TIL’s total revenues will remain high at ~75% in FY13E.

As a result, we have forecast revenues from the jewellery segment will grow at 28% CAGR to | 7,290 crore in FY10-13E driven by rising volume growth of 13% CAGR (vs. decline of 2% in FY08-10).

Strong product mix to boost margins

In addition to the plain gold jewellery, TIL has introduced diamond jewellery in its product portfolio, which typically has a high gross margin profile (~40% vs. ~20% for plain gold jewellery). The company started selling diamond jewellery in FY10 through its Zoya stores and is targeting premium and young consumers in metros and Tier I cities. According to the management, the introduction of diamond jewellery was primarily on account of slowing demand for gold jewellery due to rising gold prices in FY10. We believe TIL has significantly benefited from the introduction of diamond jewellery in its product portfolio as diamond jewellery sales constituted nearly one-third of its total jewellery sales in Q3FY11, indicating a positive response from consumers.

Further, TIL is planning to introduce low-priced diamonds in the 18 carat category for the value and mass segment that is more affordable than the highly-prevalent 22 carat jewellery in India. With the growing acceptance of diamond jewellery among consumers, strong in-house design capability and rising consumers aspirations, we believe share of diamond jewellery in TIL’s jewellery revenues will grow to ~40% in the next three

Exhibit 18: Jewellery segment to remain dominant revenue driver for TIL in FY10-FY13E

74.8

75.175.374.872.6

67.761.7

53.948.7

0

3,000

6,000

9,000

12,000

FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E

(| C

rore

)

0

20

40

60

80

(%)

Jewellery revenues Total revenues Share of jewellery - RHS


Revenues from the jewellery segment are expected to

grow at 28% CAGR in FY10-13E. Its contribution to the

overall topline is expected to remain stable at ~ 75% in the

forecast period

Exhibit 19: Jewellery segment revenues to grow at 28% CAGR in FY10-FY13E FY08 FY09 FY10 FY11E FY12E FY13E

Volume ('000 units) 2,156 2,137 2,091 2,205 2,515 2,982

YoY Growth (%) -18.5 -0.9 -2.1 5.4 14.1 18.5ASP* (|/unit) 9,400 12,918 16,723 20,402 22,851 24,450

YoY Growth (%) 92.8 37.4 29.5 22.0 12.0 7.0Revenues (| Crore) 2,026 2,760 3,497 4,499 5,747 7,290

YoY Growth (%) 57.1 36.2 26.7 28.6 27.7 26.8

Source: Company, ICICIdirect.com Research, *Average selling price

Focus on high margin diamond jewellery is expected to

boost the margins of the jewellery segment



to four years. As a result, we expect the EBIT margin of the jewellery segment to expand by 41 bps to 7.5% in FY13E vs. 7.1% in FY10.

Also, effective from April 1, 2008, TIL linked the making charges (on gold jewellery) to gold prices in order to protect its margins. The company charges between 16% and 20% of gold prices as making charges for the gold jewellery. This has resulted in stable operating margins for the company’s jewellery segment as against the prior period when TIL used to apply fixed making charges, thus exposing itself to margin volatility.

‘Gold on Lease’ facility to hedge volatility in gold prices

TIL has devised a 'Gold on Lease' policy, which enables it to minimize itsexposure to volatility in gold prices. This strategy ensures hedging to the extent of 90-95%, thereby preventing any marked to market losses.

Exhibit 20: EBIT margin of jewellery segment to expand by 41 bps in FY10-13E driven by rising share of high margin diamond jewellery in TIL’s product mix

4.6

5.96.7

5.35.8

7.1 7.2 7.5 7.5

0

2

4

6

8

FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E

(%)


The EBIT margin of the jewellery segment is expected to

expand to 7.5% in FY13E vs. 5.8% in FY09

TIL uses ‘Gold on Lease’ facility to hedge its gold inventory

from any fluctuation in gold prices



Watch segment

Domestic watch market offers significant opportunity with just 27% penetration

With volume sales of ~46 million units, the watch market in India is estimated to be ~| 3,200 crore in FY10. In value terms, the domestic watch market is dominated by the low-end segment, which accounts for ~43% of the total market share, followed by mid-upper (33%), premium (13%) and mass (11%) segments. However, the mass segment (i.e. watches priced below |. 400) accounts for ~65% in volume sales and represents the largest consumer group.

In our view, the domestic watch market presents a significant opportunity for TIL as the market is significantly underpenetrated with just 27% of Indians owning a watch. We expect this market to witness robust growth in the next few years driven by strong demand from the young population as they see watches more as a fashion accessory rather than time pieces. Exhibit 22: Domestic watch market – 46 million pieces (FY10)

Unorganised63%

Organised37%

TIL has a ~60% market share of the organised watch market and a 24% share of the total watch market (volume-wise)


TIL has a dominant position in the domestic watch market and accounts for ~20% in volume sales and ~45% in value sales. The company is present in 2,500 towns supported by over 11,000 dealers. TIL currently offers its products through multiple retail formats, which include World of Titan stores, Helios stores, Titan One stores, multi-brand outlets and large format stores. These different retail formats offer products that span across all the income segments. The World of Titan stores cater to middle-income and upper-middle income customers, Helios stores cater to higher income and brand conscious customers and Titan One stores strengthens TIL’s presence in Tier III cities.

The domestic watch market is dominated by the low-end

consumer segment in value terms and mass consumer

segment in volume terms

Exhibit 21: Domestic watch market dominated by low end segment in value terms Segmentation Price Bracket (|) Major Brands

Mass less than 400 Grey Market, Chinese

Low-end 400-1000 Sonata, HMT, Maxima

Mid-upper 1000-5000 Titan, Citizen, Timex, Swatch,Espirit

Premium above 5000Swiss brands: Tissot, Omega Fashion

brands: Fossil,Calvin Klein, Giordano, Esprit


The domestic watch market presents significant

opportunity with high under-penetration and strong

expected demand from the younger consumer segment

TIL has 60% market share in the organised watch market



Diverse product mix to improve margins in FY11E-13E

TIL has maintained its market leadership in the watch segment with the help of a well-crafted portfolio of distinctive brands, which caters to all the major consumer segments. With the introduction of ‘Sonata Super Fibre’ in the mass segment (in FY09), the company has strengthened its presence in the less penetrated mass segment. Although it commands high volumes, it has a significant presence of unbranded players. Also, TIL is the largest player in the branded low-end segment and its Sonata brand has highest volume sales of over 5 million watches per year. In our view, the strong brand positioning in the high volume mass and low-end segment will drive volume growth for the company in the next two or three years.

TIL is targeting the middle income consumer group with flagship brand Titan. The company presents diverse choices to consumers in this segment in order to raise its share in the high discretionary purchases of this consumer group. Some of the Titan sub-brands introduced recently are Titan Raga Flora, Titan Purple, Titan Edge and Titan Zoop (sub-brand for children). In our view, the middle income consumer segment presents strong growth opportunities for TIL due to high disposable income and rising aspiration level of this group, which drives multiple watch ownership.

The company has strengthened its position in the premium segment by introducing a new concept watch store, Helios, which sells high-end watches such as Xylys and Nebula. These watches compete directly with foreign brands such as Tissot, Omega, etc. In our view, this segment has significant growth potential due to rising demand from the middle income group consumers who have higher aspirations and view watches as fashion accessories. In our view, the Helios store will be successful in establishing itself as a premium watch seller, thus providing an upward push to TIL’s margins. As a result, we forecast the EBIT margins of the watch segment will improve by 153 bps to 15.5% in FY13E vs. 14% in FY10.

The EBIT margin of the watches segment will expand to

15.5% in FY13E vs. 14% in FY10

TIL has a strong product portfolio in the watches segment, which caters to all consumer segments

Exhibit 23: TIL’s brand positioning in domestic watch market




Youth – a fast rising consumer segment

With ~28% of the total population in the age bracket of 15-35 years (as per 2001 census), India has a large young population with longer working life and high inclination for discretionary spending. Further, the majority of the spending from this consumer group is centred towards fashionable accessories such as footwear, sunglasses, jewellery, bags, etc. which represents a significant opportunity for organised retailers. In order to improve its market reach in the fast growing youth segment, TIL has introduced ‘Fastrack’ (sub-brand of TIL’s flagship brand Titan), which is primarily targeted at the 18-24 age group. The company has 37 Fastrack stores (including kiosks) as on Q2FY10 and has forayed into the accessories market with the launch of bags, belts, wallets and wristbands.

In our view, TIL is well positioned to capture the rising opportunity in the youth segment with its strong brand presence and the management’s focus towards presenting fashion accessories under a single store format. The company’s Fastrack brand was primarily established as a youth-centric brand, which focuses on designer watches as well as accessories such as sunglasses, bags, belts, wallets etc. Also, the company is planning to introduce new accessories such as footwear, jewellery, cell phones, etc. in Fastrack stores in the next few years in order to capture a higher share of the consumer’s wallets from this segment.

Aggressive expansion plans under way

Discretionary demand is highly dependent on a strong distribution network that leads to increased visibility and brand awareness. With 342 watch stores (as on Q3FY11) covering major consumer segments, TIL has the strongest branch network in the branded watch market in India.

TIL has strong expansion plans from specific consumer groups such as youth market, premium segment, etc. The company is planning to open 16 new Fastrack stores in FY11E in order to cater to the strong demand for fashion accessories from young consumers. Also, TIL is planning to add ~14 new Helios stores (primarily for the premium consumer segment) in FY11E with total stores reaching ~50 by FY13E-14E.

TIL has recently announced plans to open a new retail format ‘Titan One’ stores, which will primarily target Tier III cities. According to the management, TIL is planning to open more than 20 Titan One stores by the end of FY11E. Similarly, an aggressive expansion is planned for other

Exhibit 24: EBIT margin of watch segment to expand by 153 bps to 15.5% in FY10-13E

15.7 16.415.0 15.3 15.0

14.0 14.015.0 15.5

0

3

6

9

12

15

18

FY05 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E(%

)


TIL is expected to add 89 new watch stores in FY11E with

a strong focus on specific consumer groups

TIL has introduced ‘Fastrack’ as a youth-centric brand

primarily to capture the high discretionary spending of the

young consumers



formats, taking the total number of stores in the watches segment to 405 by the end of FY11 (vs. 316 stores in FY10).

We forecast TIL’s revenues from the watch segment will grow at 21% CAGR to | 1,810 crore in FY10-13E driven by the strong volume growth (12% CAGR in FY10-13E vs. 4% in FY08-10) and rising share of watches from the high value premium segment.

Exhibit 25: Revenues from watch segment to grow at 21% CAGR during FY10-13E FY08 FY09 FY10 FY11E FY12E FY13E

Volume ('000 units) 10,286 9,694 11,036 12,525 14,297 15,682

YoY Growth (%) 14.7 -5.8 13.8 13.5 14.1 9.7ASP (|/unit) 851 936 929 994 1,069 1,154

YoY Growth (%) 3.4 9.9 -0.7 7.0 7.5 8.0Revenues (| Crore) 876 907 1,025 1,245 1,528 1,810

YoY Growth (%) 18.7 3.5 13.1 21.4 22.7 18.5




Eyewear segment

A high potential business for TIL

TIL ventured into the prescription eyewear business in 2007 and emerged as the largest optical retail chain in India (102 stores as on Q3FY11). The company sells products such as frames, sunglasses, contact lenses, ready readers and other related accessories under three in-house brands – Titan, Eye+ and Dash. According to the management, the in-house brands account for ~60% of the total eyewear revenues while the rest comes from third-party brands (such as Gucci, D&G, Armani, BOSS, Esprit, Daniel Swarovski and Mont Blanc).

TIL has a well placed strategy for expansion in the domestic eyewear market, which is expected to grow rapidly primarily driven by urbanisation, penetration of TV & computers and poor eye health due to lifestyles/improper diet. The company is planning to expand its reach in residential areas as the eyewear market is characterised by frequent visits by consumers and short eyewear lifetime (nearly three to four years). Further, TIL’s management is optimistic about the strong market potential as nearly ~30% of the total population (~300 million) needs correction in vision, representing a market size of ~25-30 million units per annum (| 1,500-1,800 crore per annum). As a result, the company is planning to add ~43 new stores in FY11E.

Although the eyewear segment contributed only 2% to TIL’s topline in FY10, we expect higher contribution from this segment once the company’s brand gains popularity. We forecast the revenues from the eyewear segment will grow at 54% CAGR to | 350 crore in FY10-13E.

With an expected market size of ~| 2,000 crore in FY13E

and lack of any competition, the domestic branded

eyewear market presents significant growth opportunities

for TIL

Exhibit 26: Eyewear market size in India

2010 2011E 2012E 2013E 2014E 2015E

India population (cr) 118.4 120.2 122.0 123.8 125.6 127.4

Population need correction (%) 30.0 30.0 30.0 30.0 30.0 30.0

Population need correction (cr) 35.5 36.1 36.6 37.1 37.7 38.2

Eyewear users (%) 25.0 26.0 27.0 28.0 29.0 30.0

Total users (cr) 8.9 9.4 9.9 10.4 10.9 11.5

Repeat purchases (years) 3.5 3.5 3.5 3.5 3.5 3.5

Annual purchases (cr units) 2.5 2.7 2.8 3.0 3.1 3.3 Average selling Price (|) 550 589 630 674 721 771 Annual market revenue (| cr) 1,396 1,577 1,778 2,002 2,250 2,526


Exhibit 27: TIL’s eyewear segment revenues are expected to grow at 54% CAGR in FY10-13E FY08 FY09 FY10 FY11E FY12E FY13E

Volume ('000 units) 572 854 1,481 2,211 3,097 4,646

YoY Growth (%) 50.5 49.2 73.5 49.3 40.1 50.0ASP (|/unit) 708 760 650 683 717 753

YoY Growth (%) 6.6 7.3 -14.4 5.0 5.0 5.0Revenues (| Crore) 41 65 96 151 222 350

YoY Growth (%) 60.4 60.0 48.5 56.8 47.1 57.5




Risks and Concerns Volatility in gold prices

Jewellery demand is highly dependent on the movement in gold prices with stable/falling prices leading to an improvement in jewellery demand and vice versa. The significant jump in gold prices can lead to a significant slowdown in jewellery demand in the domestic market and negatively impact our demand forecast.

Increasing competition from international watch manufactures

Several international watch majors such as Tissot, Omega, Rolex Fossil, Calvin Klein, Giordano, Esprit and Tommy Hilfiger complete directly with TIL primarily in the premium watch category. With growing disposable income and rising aspirations levels, India presents an attractive market to the foreign premium watch manufacturers. TIL is highly susceptible to an increase in competition from foreign brands, which can negatively impact our revenues and margin forecast in the watches segment.

Higher rentals in short-term

With robust expansion plans in FY11E (149 new stores), TIL is exposed to rising rental expenses on new stores as well as existing stores that are on lease. A higher than expected increase in rental expenses can negatively impact the company’s expansion plans, leading to reduced profitability.

Slower than expected recovery from economic slowdown

TIL’s products fall under the discretionary category, which has high delta with the growth in disposable income and is highly dependent on the healthy growth of the economy. A slower than expected recovery in the economy can lead to lower spending on discretionary items (and more on necessities) leading to reduced volume growth for the company. Also, middle class consumers are highly likely to delay upgrading to premium products in the event of a delay in economic recovery. This, in turn, can negatively impact our revenues and margin forecasts.

Continued dominance of unbranded jewellery

The jewellery market in India is dominated by unorganised players with over 90% of the market share. In the recent past, TIL has been able to increase its market share by targeting young and educated customers in metros and Tier I cities with the guarantee on purity of gold and presenting contemporary designs. However, TIL’s incremental growth is dependent on its ability to attract a large consumer base in Tier II and Tier III cities who still rely on family jewellers.

Quality of franchisee products

We expect a significant increase in the number of TIL’s franchisees with the expansion of the company in suburban and rural markets. As product quality is one of the key drivers of TIL’s growth, any dilution in the quality of the jewellery products offered by franchisees would have an adverse impact on the company’s brand image.



Financials CAGR of 28% expected in TIL’s revenues in FY10-13E We expect TIL’s revenues to grow at 28% CAGR to | 9,751 crore in FY10-13E driven by growth of 28% CAGR in revenues from the jewellery segment (| 7,290 crore) and growth of 21% CAGR in the watches segment (| 1,810 crore). In our view, the jewellery segment will be the key growth driver for TIL’s topline with revenue contribution of over 75% during FY10-13E (vs. 54% in FY06). Also, we forecast volume sales in jewellery segment will grow at 13% CAGR during FY10-13E (vs. a decline of 2% CAGR in FY08-10) driven by rising preference towards branded and designer jewellery from the middle class (that is a huge consumer base) and strong brand presence of TIL in the domestic market. The topline growth is expected to be further supported by strong traction in the watches segment with revenue growth of 21% CAGR to | 1,810 crore in FY10-13E (vs. 8% in FY08-10) and volume growth of 12% CAGR (vs. 4% CAGR in FY08-10).

Exhibit 28: Revenues to grow at 28% CAGR to | 9,751 crore in FY10-13E

1,4402,090

2,9943,804

7,657

9,751

6,277

4,675

0

3,000

6,000

9,000

12,000

FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E

(| C

rore

)

0

12

24

36

48

(%)

Revenues - Standalone YoY Growth - RHS


Exhibit 29: Jewellery segment to continue to dominate TIL’s topline in FY10-13E

54 62 68 73 75 72 75 75

44 35 29 24 22 20 20 19

0

25

50

75

100


(%)

Jewellery Watches Eyewear Precision Engineering




Margins expected to expand With the significant revival of the product mix by inclusion of high margin products such as diamond jewellery (with margin profile of ~2x plain gold jewellery) and rising profile of premium products in the watches segment, we expect TIL’s EBITDA margin to expand to 9.6% in FY13E (vs. 8.5% in FY10). Further, we expect margins to get a push up from FY12E onwards as the losses from the eyewear segment are expected to decline.

Working capital requirement to increase In our view, TIL’ working capital will increase to 32 days in FY13E (vs. 26 days in FY10 and 37 days in FY09) driven by rising inventory in the new stores that are expected to come up in the next three years. However, better inventory management at the existing stores are expected to keep working capital days at manageable levels.

Exhibit 30: EBITDA margins to expand ~113 bps during FY10-13E

154 198251 297

396

606713

935

0

250

500

750

1,000


(| C

rore

)

0

3

6

9

12

(%)

EBITDA EBITDA margin - RHS


Exhibit 31: EBIT margins to expand ~198 bps during FY10-13E

134 173221 256

335

568676

890

0

250

500

750

1,000


(| C

rore

)

0

3

5

8

10

(%)

EBIT EBIT margin - RHS




Return ratios expected to improve substantially We expect TIL’s return ratios to improve significantly in FY11E-13E driven by strong revenue growth and expansion in margins due to rising share of high-margin premium products in the company’s product mix. The reduction in losses in the eyewear division is also expected to boost margins, going forward. Further, an improving asset turnover is expected to push up the RoCE to 51.8% in FY13E vs. 44% in FY10.

Exhibit 32: Working capital days at manageable levels in FY11E-13E

63.0

42.4 41.037.3

26.022.0

28.131.5

0

20

40

60

80


(Day

s)


Exhibit 33: Return ratios to improve in FY10-13E

0

10

20

30

40

50

60

70


(%)

RoCE RoNW



Working capital requirement to increase In our view, TIL’ working capital will increase to 32 days in FY13E (vs. 26 days in FY10 and 37 days in FY09) driven by rising inventory in the new stores that are expected to come up in the next three years. However, better inventory management at the existing stores are expected to keep working capital days at manageable levels.




Valuations

At the CMP of | 3487, the stock is trading at a P/E of 32.2x in FY12E and 24.5x in FY13E. We have valued TIL using the DCF methodology. Our valuation is based on assuming a 10.4% WACC and 4% terminal growth. We expect TIL’s standalone revenues to grow at 28% CAGR to | 9,751 crore in FY10-FY13E driven by aggressive expansion plans in the jewellery, watches and eyewear segment leading to strong growth in volume sales. We forecast margin accretion on the back of rising share of premium products in the overall product mix and decline in losses in the eyewear segments leading to growth of 36% CAGR in bottomline.

However, we believe the market is factoring in the growth potential of the company given the 94% jump in the stock price in a year (vs. 4% in the Sensex). Hence, we are initiating coverage on the stock with an ADD rating and a target price of | 3624/ share (premium of 4% from the current price).

We have valued TIL at | 3624/share using the DCF

methodology, which is at 4% premium to the CMP

Exhibit 34: DCF assumptions WACC (%) 10.4 Terminal Growth (%) 4.0 PV of Free Cash Flows (| crore) 4,984 Terminal Value of Free Cash Flows (| crore) 11,193 Total Value of Free Cash Flows (| crore) 16,177 No. of Shares (in crore) 4.4 DCF-derived Price Target 3,624 Implied PE (on FY11E EPS) 33.5


Exhibit 35: P/E (1 year forward) - TIL

0500

1,0001,5002,0002,5003,0003,5004,0004,500

Mar

-04

Sep-

04

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Price Average 29.3x 33.7x 20.3x 15.8x




Exhibit 36: Comparable valuation - TIL CMP Market Cap P/E (x) EV/EBITDA (x) P/BV (x)

| | Crore FY12E FY13E FY12E FY13E FY12E FY13E

TIL 3,487 15,479 32.2 24.5 21.2 16.1 15.4 11.4

Pantaloon 274 5,950 16.0 10.1 5.3 5.1 1.5 1.6

Shoppers Stop 341 2,797 32.3 22.3 13.8 9.3 2.3 1.5

Rajesh Exports 110 3,179 10.4 8.6 10.0 8.0 1.7 1.4

Gitanjali Gems 234 2,008 5.8 3.6 6.3 4.3 0.7 0.6

Mean 889 5,883 19.3 13.8 11.3 8.5 4.3 3.3

Median 274 3,179 16.0 10.1 10.0 8.0 1.7 1.5 Source: Company, ICICIdirect.com Research

Exhibit 37: Healthy EBITDA margins

9.3

11.0

6.9

1.5

7.4

9.610.6

8.5

1.5

7.9

-

2.0

4.0

6.0

8.0

10.0

12.0

TIL Pantaloon Shoppers Stop Rajesh Exports Gitanjali Gems

%

FY12E FY13E

Source: Consensus Estimates, ICICIdirect.com Research

Exhibit 38: Best return ratios

52.4

12.8

21.2

14.1 13.0

51.5

12.6

30.9

- --

10.0

20.0

30.0

40.0

50.0

60.0

TIL Pantaloon Shoppers Stop Rajesh Exports Gitanjali Gems

%

FY12E FY13E

Source: Consensus Estimates, ICICIdirect.com Research



Exhibit 39: Profit & loss account | Crore FY09 FY10 FY11E FY12E FY13ENet Sales 3,803 4,674 6,276 7,656 9,750Growth (%) 27.0 22.9 34.3 22.0 27.3Other Op. Revenues 0.9 0.6 0.7 1.0 1.3Op. Expenditure 3,507 4,279 5,671 6,944 8,816EBITDA 297 396 606 713 935Growth (%) 18.5 33.0 53.2 17.6 31.2Depreciation 42 60 38 36 45EBIT 256 335 568 676 890Interest 29 25 9 10 12Other Income 4 11 35 19 25Extraordinary Item 0 0 1 0 0PBT 231 321 595 686 902Growth (%) 14.0 39.4 85.3 15.2 31.5Tax 72 71 164 206 271Rep. PAT before MI 159 250 431 480 632Minority Interest (MI) 0 0 0 0 0Rep. PAT after MI 159 250 431 480 632Adjustments 0 0 0 0 0Adj. Net Profit 159 250 431 480 632Growth (%) 5.8 57.5 72.3 11.3 31.5

Company, ICICIdirect.com Research, *Not Meaningful

Exhibit 40: Balance sheet | Crore FY09 FY10 FY11E FY12E FY13EEquity Capital 44 44 44 44 44Reserves & Surplus 507 680 960 1,315 1,783Shareholder's Fund 551 724 1,004 1,360 1,827Borrowings 175 73 92 117 149Unsecured Loans 0 0 0 0 0Deferred Tax Liability 18 5 5 5 5Source of Funds 745 802 1,101 1,482 1,981Gross Block 530 561 621 797 947Less: Acc. Depreciation 302 314 339 376 421Net Block 228 247 282 421 526Capital WIP 20 12 128 103 102Net Fixed Assets 248 259 410 524 629Intangible Assets 46 16 0 0 0Investments 8 8 8 8 8Cash 55 187 304 362 504Trade Receivables 106 94 132 168 214Loans & Advances 114 183 184 235 298Inventory 1,203 1,340 1,842 2,354 2,988Total Current Asset 1,478 1,804 2,462 3,118 4,004Current Liab. & Prov. 1,035 1,284 1,779 2,168 2,660Net Current Asset 443 519 683 950 1,344Other Miscellaneous 0 0 0 0 0Application of Funds 745 802 1,101 1,482 1,981

Company, ICICIdirect.com Research



Exhibit 41: Cash flow statement | Crore FY09 FY10 FY11E FY12E FY13ENet Profit before Tax 231 321 595 686 902Other Non Cash Exp 0 0 0 0 0Depreciation 42 60 38 36 45Direct Tax Paid 78 84 164 206 271Other Non Cash Inc 4 11 16 19 25Other Items 29 25 9 10 12CF before change in WC 219 311 462 507 664Inc./Dec. In WC -52 56 -46 -210 -252CF from Operations 167 367 416 297 412Pur. of Fix Assets -45 -24 -176 -150 -150Pur. of Inv and Others 44 11 16 19 25CF from Investing 0 -13 -160 -131 -125Inc./(Dec.) in Debt -82 -103 19 26 32Inc./(Dec.) in Net Worth 5 0 0 0 0Others -81 -103 -158 -135 -177CF from Financing -158 -206 -138 -109 -145Opening Cash Balance 52 55 187 304 362Closing Cash Balance 55 187 304 362 504

Company, ICICIdirect.com Research

Exhibit 42: Key ratios Total Revenues 27.0 22.9 34.3 22.0 27.3EBITDA 18.5 33.0 53.2 17.6 31.2Adj. Net Profit 5.8 57.5 72.3 11.3 31.5Cash EPS 11.5 54.6 51.1 10.1 31.0Net Worth 26.4 31.4 38.6 35.4 34.4


Exhibit 43: Key ratios

FY09 FY10 FY11E FY12E FY13ERaw Material 72.6 73.8 73.8 73.0 72.9Employee Expenditure 6.1 5.9 5.5 6.2 6.0Effective Tax Rate 31.1 22.1 27.5 30.0 30.0

Profitability Ratios (%)EBITDA Margin 7.8 8.5 9.7 9.3 9.6PAT Margin 4.2 5.4 6.9 6.3 6.5

Per Share Data (|)Revenue per share 856.8 1,053.1 1,413.8 1,724.8 2,196.4Book Value 124.2 163.2 227.0 307.0 412.3Cash per share 12.3 42.1 68.6 81.4 113.5EPS 35.8 56.4 97.2 108.2 142.3Cash EPS 45.2 69.9 105.7 116.4 152.4DPS 10.0 15.0 28.7 24.1 31.7

Company, ICICIdirect.com Research, *Standalone financials



Exhibit 44: Key ratios Return Ratios FY09 FY10 FY11E FY12E FY13ERoNW 32.2 39.2 49.8 40.5 39.6ROCE 36.0 44.0 59.9 52.4 51.5ROIC 15.7 14.7 21.7 25.7 24.0Financial Health Ratio Operating CF (| Cr) 167 367 416 297 412FCF (| Cr) 129 356 220 147 262Cap. Emp. (| Cr) 727 797 1,099 1,480 1,980Debt to Equity (x) 0.3 0.1 0.1 0.1 0.1Debt to Cap. Emp. (x) 0.2 0.1 0.1 0.1 0.1Interest Coverage (x) 8.7 13.2 61.6 69.5 71.8Debt to EBITDA (x) 0.6 0.2 0.2 0.2 0.2DuPont Ratio Analysis PAT/PBT 68.9 77.9 72.5 70.0 70.0PBT/EBIT 90.2 95.8 104.7 101.4 101.4EBIT/Net Sales 6.7 7.2 9.1 8.8 9.1Net Sales/Total Asset 519.9 604.4 659.8 592.9 563.1Total Asset/NW 1.4 1.1 1.1 1.1 1.1

(x times)Working Capital FY09 FY10 FY11E FY12E FY13EWorking Cap./Revenues (%) 11.7 11.1 10.9 12.4 13.8Inventory turnover 106.7 99.3 92.6 100.0 100.0Debtor turnover 9.7 7.8 6.5 7.1 7.1Creditor turnover 64.7 55.4 58.5 70.7 72.0Current Ratio 1.4 1.4 1.4 1.4 1.5

(| crore)FCF Calculation FY09 FY10 FY11E FY12E FY13EEBITDA 297 396 606 713 935Less: Tax 72 71 164 206 271NOPLAT 226 325 442 507 664Capex -45 -24 -176 -150 -150Change in working cap. -52 56 -46 -210 -252FCF 129 356 220 147 262

(x times)Valuation FY09 FY10 FY11E FY12E FY13EPE (x) 97.4 61.8 35.9 32.2 24.5EV/EBITDA (x) 52.5 38.8 25.2 21.4 16.2EV/Sales (x) 4.1 3.3 2.4 2.0 1.6Dividend Yield (%) 0.3 0.4 0.8 0.7 0.9Price/BV (x) 28.1 21.4 15.4 11.4 8.5




RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: 20% or more; Buy: Between 10% and 20%; Add: Up to 10%; Reduce: Up to -10% Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 7th Floor, Akruti Centre Point, MIDC Main Road, Marol Naka, Andheri (East) Mumbai – 400 0293

[email protected]

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The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances.

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