3-Jan-2022

TITAN COMPANY LIMITED

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Titan
DHDCompany Limited is an Indian lifestyle company that mainly manufactures fashion accessories such as watches, jewellery
and eyewear. Part of the Tata Group and started as a joint venture with TIDCO (Tamil Nadu Industrial Development Corporation), the
company is headquartered in Bengaluru, Karnataka.
Titan commenced operations in 1984 under the name Titan Watches Limited. Later, it diversified into jewellery with Tanishq and
subsequently into eyewear with Titan Eyeplus. It is the largest branded jewellery maker in India, with more than 80% of its total
revenues coming from the jewellery segment.
Titan produces watches under the brand names Titan, Fastrack, Sonata, Nebula, RAGA, SF, Favre Leuba & Xylys and holds the position
of the fifth-largest integrated watch manufacturer in the world. It also forayed into the verticals of Indian dress wear and fragrances
under the brands Taneira and Skinn.

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DHD REVENUE MIX (FY21)

Segment wise Region wise
2% 2%
Total: ₹21,830 cr Total: ₹20,783 cr*
7% 1%

89% 99%

Jewellery Watches & wearables Eyewear Others

India Others
Others includes aerospace & defence, automation solutions, accessories, *Standalone figures
fragrances, Indian dress wear, corporate (unallocated) and other income.

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 GROWTH
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DHD SALES GROWTH

In FY21, the company reported net sales of ₹21,644
cr, a growth of 2.8% from FY20.
During the year, jewellery segment saw a revenue
growth of 11.6%. However, all the other segments
saw a YoY decline. Disruption caused due to the
pandemic yielded lower discretionary spends,
negatively impacting the company’s revenues.
In H1 FY22, revenue stood at ₹10,966 cr. Titan
witnessed strong demand across categories post the
second Covid wave. Additionally, it added 60 stores
(net) during the period.

5 Year CAGR: 13.9%

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DHD EBITDA GROWTH

In FY21, EBITDA was ₹1,724 cr, a de-growth of 30.1%
YoY.
During the year, the company had recognized a loss
of ₹739 cr under other expenses as a result of
change in the cash flow hedging relationship.
However, advertising expenses were lower.
With effect from 1st July 2021, the company has
decided to adopt a Fair Value hedge accounting
methodology to hedge its gold inventory for
fluctuations in the price of gold instead of cashflow
arising out of sale of gold in future.
In H1 FY22, EBITDA stood at ₹1,105 cr. In the
jewellery division, both plain and studded segments
grew in double digits, however a much stronger
growth in the plain segment led to studded mix
being below pre-pandemic levels.

5 Year CAGR: 13.0%

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DHD PAT GROWTH

In FY21, the company reported a profit of ₹979 cr, a
fall of 34.6% YoY.
Fall in PAT is due to lower operating profits during
the year. Finance cost and depreciation constitute a
total of ~2.6% of revenue. Effective tax rate in FY21
was 27% v/s 29% during FY20.
During H1 FY22, PAT was at ₹659 cr out of which
as
₹641 cr came in Q2 FY22.

5 Year CAGR: 7.7%

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 GROWTH EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY21, EBITDA margin stood at 8.8%, lower on
account of fall in operating profits.
The metric has been in the range of 9%-12% in the
past few years.
In H1 FY22, EBITDA margin was at ~11%.

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DHD PAT MARGIN

In FY21, the PAT margin was 4.5%.

PAT margin has been in the range of ~5%-7% in the

past few years.

In H1 FY22, PAT margin stood at ~6%.

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DHD ROCE
In FY21 ROCE stood at 14.7%.
The company has generated an average ROCE of
~23% in the past 5 years.

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 PROFITABILITY
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DHD ROE
In FY21 ROE stood at 13.8%.
Average ROE in the past 5 years was 20.8%.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, cash flow from operating activities stood at
₹4,139 cr despite lower profits on account of
working capital adjustments. Increase in gold on loan
(₹2,625 cr) constituted a major item under working
capital adjustments.
Cash outflow from investing for FY21 was ₹2,801 cr,
primarily on account of net purchases of mutual
funds (₹2,651 cr). The company made further
investments in property, plant and equipment to the
tune of ~₹139 cr.
Outflow from financing activities was ₹1,234 cr,
largely towards repayment of borrowings (₹550 cr),
dividends (₹355 cr) and finance costs (₹203 cr).

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 EFFICIENCY
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WORKING
DHD CAPITAL CYCLE
The company’s working capital days stood at 131.5
days in FY21.
The rise is largely due to higher days of inventory
during the year. Inventory in FY21 rose by ₹316 cr.

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 EFFICIENCY
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DHD FREE CASH FLOW

In FY21, the free cash flow per share was ~₹43, due
to higher operating cash flow.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
In FY21, the asset turnover ratio was 1.46x.
Rise in assets of the company during the year was
due to increased financial investments.

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 EFFICIENCY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

Total debt to equity ratio of the company stood at
0.58x in FY21.
Gold on loan as on 30th September, 2021 stood at
₹4,856 cr whereas total borrowings were ₹243 cr.

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INTEREST
DHD COVERAGE RATIO
During FY21, interest coverage ratio was 7.56x.
Interest payments of ₹203 cr comprised interest on
lease liability (₹114 cr) and gold on loan (₹55 cr).
Interest rate of gold on loan varied from 1.45% to 3%
p.a. during the year.

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 SOLVENCY
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DHD CURRENT RATIO

In FY21, the current ratio was at 1.71x.
The ratio has remained stable over the years.

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 SOLVENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Titan Company Limited is currently trading at a TTM
PE multiple of 128.18x.

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 VALUATION
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DHD DIVIDEND YIELD

The dividend payout ratio of the company has been
between 24%-32% in the past few years.
The company paid a final dividend of ₹4 per share for
FY21. The EPS for FY21 was ₹10.93, hence a dividend
payout ratio of 36.6%.

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 VALUATION
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DHD KEY LEVELS

Titan Company Limited has been in a steady uptrend
since the beginning of 2017.
The stock made a double bottom at around ₹750 in
Mar, 2020 and has more than tripled since then.
In line with our expectations, the stock moved
beyond the ₹1800 mark to create a lifetime high of
₹2678 in Oct, 2021.
The zone of ₹1800-₹1900 is now likely to act as a
strong base and a decline to those levels may be
used for further accumulation.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
Key focus areas of the management constitute
acceleration of omni-channel marketing strategy as
e-commerce continues to gain traction, product
innovations across different businesses to gain mind
and market share and re-evaluation of operations to
ensure adequate liquidity.
The management would continue to focus on cash
flows and optimized spends. The Company has
already begun a “War on Waste” program, to
monitor costs and ensure adequate liquidity.

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 QUALITY
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SHAREHOLDING
DHD PATTERN
The promoter holding has remained constant at
52.9% for the last 9 quarters.
FII stake increased from 18.41% in Q1 FY22 to
19.06% in Q2 FY22.
DII stake increased from 10.08% in Q1 FY22 to
10.26% in Q2 FY22.
Top Public Shareholding:-
Rakesh Radheshyam Jhunjhunwala 3.80%
LIC of India 3.24%
SBI – ETF Nifty 50 1.27%
ICICI Prudential Life Insurance Co. ltd. 1.10%
Rekha Rakesh Jhunjhunwala 1.07%

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 QUALITY
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DHD SECTOR POTENTIAL

• India’s gems and jewellery sector’s market size was about US$ 75 billion in 2017 and is expected to reach US$ 100 billion by 2025.
It contributes about 7% to India’s Gross Domestic Product (GDP) and 16% to India’s total merchandise export.
• Gems and jewellery exports of India reached pre-COVID-19 levels between November and December 2020, due to the rising
demand from key markets, such as the US, according to the Gem and Jewellery Export Promotion Council (GJEPC).
• The government has started the phased implementation of mandatory hallmarking of gold jewellery with effect from June, 2021,
which is an important step for the development of the industry and safeguarding consumer’s interest.
• The government’s announcement on establishing gold spot exchange could aid India’s participation in determining gold price in
the international market.
• Watches and wearables industry has been experiencing rapid tectonic shifts enabled by technology. Due to the advent of mobiles,
smart watches and other personal products, demand for replacement of watches has fallen sharply.
• The eyewear industry is estimated at ₹11,000 cr (spectacles 73%, sunglasses 21% and contact lenses 6%) and is growing at 5%, of
which organised retail (chains) is about 22%. The market remains fragmented as local and online retailers constitute a large share.
• The Fragrance industry size is estimated to be ~ ₹4,300 cr with deodorants around ₹3,000- ₹3,100 cr i.e., 70% of industry and fine
fragrances to be around ₹1,200 cr.
• Deodorants constituting 70% of the industry, continues to be an opportunity to upgrade customers from deodorant to perfumes.

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 QUALITY
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COMPETITIVE
DHD LANDSCAPE
Titan holds a leadership position in jewellery and
wrist watches segment with a diversified brand
portfolio. In addition to this, the company also has a
leading position in organized eye wear market.
In the contemporary market scenario, economic
disruption caused by COVID-19 has led to higher
inventories within the industry. This could lead to a
price war, adversely impacting profitability.
In the jewellery segment, going forward the
company may face difficulty penetrating into new
geographies due to increased competition from
other organized players. Additionally, in the eyewear
segment, margins of the company have been modest
due to intense competition from local as well as
online retailers.

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DHD FUTURE OUTLOOK

• In the jewellery segment, the company is looking to expand in smaller towns and tier 3 and tier 4 cities. “Middle India” focussed
expansion programme will continue in the coming years to strengthen access.
• Watches and wearables division made an entry into audio accessories by launching Over The Head (0TH) headphones and Truly
Wireless (TWS) earphones.
• During FY21, the eye wear division launched its first 'Fastrack' branded eyewear store. Verve and Acetate collections were
launched under the Fastrack brand. Going forward, the company expects to benefit from its strong market positioning.
• For the International business division, the performance of its Dubai Boutique has exceeded the internal expectations and all the
retail metrics are healthy. The division is now planning to open another store in GCC (Gulf Cooperation Council).
• In April 2021, TCL North America Inc. was incorporated as a wholly owned subsidiary, of Titan Company, with the objective of
carrying on the business of jewelry retailing. TEAL USA Inc. was incorporated as a wholly owned subsidiary of TEAL with the
objective of business development for Aerospace & Automation Solutions.
• Titan Commodity Trading Limited has started operations in Q1 FY22 for the hedging of the Gold.
• The company introduced digital gold as a new pilot offering which helps customers purchase gold online with an ability to convert
it into jewellery at a later stage and is gaining traction amongst the younger population.
• The company expects to add ~20 new Tanishq stores in the next six months and 30-35 stores every year, going forward.

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 QUALITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
THE MATRIX
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DHD
Edge Meter Aspects Grade
Growth 4
Profitability 4
Efficiency 3
Solvency 4
Valuation 3
Quality 4
TOTAL 22

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

THANK YOU
This document and the process of identifying the potential of a company has been produced only for learning purposes. Since
equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

www.stockedge.com

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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates has, any other material conflict of interest at the time of publication of the research report or at the time
of public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have managed or co-managed public offering of securities for the subject company in the past twelve
months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for investment banking or merchant banking or brokerage services from
the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation or other benefits from the subject company or third party in connection
with the research report.
Neither Kredent Infoedge P Ltd. nor any of its associates was a client during twelve months preceding the date of distribution of the research report.
Neither Kredent Infoedge P Ltd. nor any of its associates has served as an officer, director or employee of the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates has been engaged in Market making for the subject company.
Kredent Infoedge P Ltd. shall provide all other disclosures in research report and public appearance as specified by the Board under any other regulations.