3QFY2011 Result Update | Retail

January 31, 2011

Titan Industries
Performance Highlights
Y/E March (` cr) Sales EBITDA EBITDA % PAT
Source: Company, Angel Research

NEUTRAL
CMP Target Price
3QFY10 1,334 107 8 75 82 % yoy 47 82 Angel est 2,001 200 10.0 145 (5) % diff (2) (2)

`3,593 -

3QFY11 1,955 195 10 138

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Retail 15,949 0.9 4,244/1,460 44796 10 18,328 5,506 TITN.BO TTAN@IN

For 3QFY2011, Titan Industries (Titan) reported stellar performance, which was in line with our expectations. The company reported top-line growth of 47% yoy to `1,955cr, backed by robust revenue performance by the jewellery and watches segments, which grew by 50% yoy and 35% yoy, respectively. For the quarter, EBITDA and PAT registered yoy growth of 82% each to `195cr (`107cr) and `138cr (`75cr), respectively. Operating margins stood at 10% (8%) during the quarter. At current valuations, we believe the stock is fairly valued. Hence, we continue to maintain our Neutral view on the stock. Healthy growth in jewellery and watches segments improves performance: During the quarter, Titans jewellery segment witnessed stellar growth of 50% yoy in revenue to `1,579cr (`1,055cr) on the back of higher gold prices, higher offtake of studded jewellery and overall strong volume growth (~20%). The jewellery segment also witnessed a ~200bp yoy surge in PBIT margin to 9%. The watches segments revenue witnessed 35% yoy growth to `325cr (`241cr) on improved sales of high-margin medium/high-end watches. PBIT margin of the watches segment improved by 330bp yoy to 18% (14.7%). Strong sales were driven by buoyant consumer sentiment and discretionary spending. Revenue of the companys other businesses (eyeware and precision engineering) grew by 64% yoy and managed to curtail loss by 15% to `5cr on PBIT level as compared to loss of `6cr in 3QFY2010. Outlook and valuation: Although we remain positive on Titans growth prospects, we believe at 28.2x FY2012E earnings it discounts the same fairly well. Hence, we maintain our Neutral rating on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 53.4 8.6 10.4 27.6

Abs. (%) Sensex Titan

3m (8.5)

1yr 12.4

3yr 3.8 210.3

1.1 139.7

Key financials (Consolidated)

Y/E March (` cr) Net sales % chg Net profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2009 3,833 27.9 164 13.3 7.9 36.9 93.8 27.6 32.7 36.7 4.0 51.0

FY2010 4,678 22.1 251 53.1 8.5 56.5 61.3 21.0 38.9 39.1 3.3 39.0

FY2011E 6,274 34.1 467 86.0 9.5 105.2 32.9 14.1 51.2 49.0 2.5 26.0

FY2012E 7,842 25.0 546 16.9 9.0 122.9 28.2 10.2 41.9 44.1 1.9 21.6 Sageraj Bariya
+91-22-3935 7800 ext. 6815 sageraj.bariya@angelbroking.com

Please refer to important disclosures at the end of this report

Titan Industries | 3QFY2011 Result Update

Exhibit 1: Quarterly performance

Y/E March (` cr) Total Revenue Raw material as % of sales Staff cost as % of sales SGA as % of sales Other Exp as % of sales Total Exp as % of sales EBITDA EBITDA % Depreciation EBIT EBIT % Interest Other Income PBT Total Tax Tax rate Reported PAT Equity EPS 3QFY11 1,955 1,475 75 85 4 89 5 110 6 1,760 90 195 10.0 9 187 10 2 15 200 62 31 138 44 31.0 3QFY10 1,334 1,017 76 68 5 60 5 81 6 1,226 92 107 8.1 9 98 7 3 3 98 23 23 75 44 17.0 82 82 % YoY 47 9MFY11 4,744 3,510 74 245 5 214 5 294 6 4,264 90 480 10.1 25 455 10 7 31 479 62 13 417 44 93.9 9MFY10 3,369 2,466 73 195 6 157 5 252 7 3,069 91 301 8.9 27 274 8 16 7 265 60 23 205 44 46.1 104 60 % YoY 41

Source: Company, Angel Research

Jewellery segment witnesses growth, sales up 47%: During the quarter, Titans jewellery segment witnessed a 47% yoy increase in revenue on the back of higher volume offtake (up ~20%) and strong gold prices (`2,000/gram). PBIT margin also improved by 200bp yoy to 9% during 3QFY2011.

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Exhibit 2: Jewellery segment Sales and margin trend

1,800 1,500 1,200 9% 9% 10% 9% 8% 7% 7% 7% 7% 6% 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11

(` cr)

900 600 300 0

7%

Sales
Source: Company, Angel Research

PBIT Margin

Watches segments revenue up 35%, margins improve: The watches segment posted robust growth of 35% yoy in revenue to `325cr (`241cr). Higher same store sales and increased offtake of high-margin medium/high-end watches were largely responsible for the increase in margins. Total volume growth during the quarter stood at 25%. On the PBIT front, Titan witnessed growth of 65% yoy, with margin improving by 330bp to 18% (14.7%).

Exhibit 3: Watches segment Sales and margin trend

400 300 20% 15% 7% 100 0 2QFY10 3QFY10 4QFY10 Sales
Source: Company, Angel Research

25% 21% 16% 18% 20% 15% 10% 5% 0% 1QFY11 2QFY11 3QFY11

(`cr)

200

PBIT Margin

Other businesses continue to report losses in PBIT: The other businesses segment comprising eyewear and precision engineering reported sales growth of 64% to `66cr (`40cr) during the quarter. The new eyewear business has grown its retail presence through Titan Eye+ stores. On the back of opening of new stores, the segment incurred loss of `5cr on PBIT level. We expect the performance of the segment to improve in the ensuing quarters.

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Exhibit 4: Segment-wise performance

(` cr) Revenues Watches & Clocks Jewellery Others (Corporate) Total PBIT Watches & Clocks Jewellery Others (Corporate) Total PBIT Margin (%) Watches & Clocks Jewellery Others (Corporate) Overall
Source: Company, Angel Research

3QFY11 325 1,579 66 1,970 59 142 (5) 195 18.0 9.0 (7.8) 9.9

3QFY10 241 1,055 40 1,336 35 74 (6) 104 14.7 7.0 (15.0) 7.8

% YoY 35 50 64 47 65 92 (15) 89

9mFY11 938 3,654 176 4,767 177 310 (8) 479 18.8 8.5 (4.6) 10.0

9mFY10 745 2,513 110 3,368 123 183 (26) 280 16.5 7.3 (23.5) 8.3

% YoY 26 45 59 42 44 69 (69) 71

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Investment arguments
Organised national player in the watch and jewellery segments
Titan Watches enjoys more than 65% market share in the organised watch segment and 41% market share in the organised jewellery retailing segment. Titan's leadership position enables it to bargain hard with its vendors for bulk discounts, resulting in lower cost structure as compared to other regional players. We estimate this bargaining power of Titan, coupled with its pan-India presence, will enable it to expand its EBITDA margin to 9% in FY2012E from 8.5% in FY2010 and PAT margin to 7% in FY2012E from 5.4% in FY2010.

Easily scalable franchisee model

Titan operates 8590% of its stores through the franchisee model, which provides scalability to its business. The companys strong positioning in the respective segments has aided it to attract and scale up its business through the franchisee model. The company has also built a strong retailing network (nearly 500 own stores besides dealers/franchisee arrangements), which is unmatched in the area of specialty retailing. On the back of its further expansion plans and strong demand outlook, we estimate Titan's top line, EBITDA and adjusted PAT to witness CAGR of 30%, 34% and 41% over FY201012E, respectively.

Robust return ratios

Over the years, Titan has consistently posted robust RoE and RoCE, which have also been the highest in the industry. The company has consistently delivered RoE of 35% and above, and we estimate it to maintain RoE of 42.8% and 38.7% in FY2011E and FY2012E, respectively, on account of high asset-turnover ratio. Titan has a history of operating at a leverage below 1, which has given it high RoCE. We estimate Titan to deliver RoCE of 49% and 44% in FY2011E and FY2012E, respectively.

Outlook and valuation

Considering the improving volume trend in the jewellery and watches segments coupled with the companys expansion plans, we expect Titan to witness better times going ahead. Although we remain positive on the companys growth prospects, we believe at 28.2x FY2012E earnings it discounts the same fairly well. Hence, we continue to maintain our Neutral rating on the stock.

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Exhibit 5: One-year forward P/E band

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -

(`)

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

May-05

May-06

May-07

May-08

May-09

May-10

Sep-10

Price
Source: C-line, Angel Research

Jan-06

12x

Jan-07

20x

Jan-08

28x

Jan-09

36x

January 31, 2011

Jan-10

Jan-11

Titan Industries | 3QFY2011 Result Update

Profit & Loss Statement

Y/E March (` cr) Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Income/(Exp.) PBT (reported) Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY07 2,091 11.9 1,900 1,369 362 170 191 30.0 9.1 26 165 44.2 7.9 21 6 4 149 86.2 149 38 25.2 112 112 115.8 5.3 25 25 1,692.1 FY08 2,997 43.3 2,757 2,129 431 197 240 25.9 8.0 33 207 25.5 6.9 21 3 2 189 26.6 189 45 23.6 145 145 29.5 4.8 33 33 29.5 FY09 3,833 27.9 3,529 2,779 514 236 304 26.6 7.9 42 262 26.6 6.8 29 5 2 238 25.8 47 285 74 26.0 211 164 13.3 4.3 37 37 13.3 FY10 4,678 22.1 4,281 3,443 560 278 397 30.5 8.5 61 336 28.5 7.2 25 12 4 323 35.5 24 347 72 20.7 275 251 53.1 5.4 57 57 53.1 584 117 20.0 467 467 86.0 7.4 105 105 86.0 682 136 20.0 546 546 16.9 7.0 123 123 16.9 FY11E 6,274 34.1 5,679 4,448 851 380 595 49.9 9.5 34 561 66.8 8.9 10 33 6 584 80.9 FY12E 7,842 25.0 7,135 5,587 1,063 484 707 19.0 9.0 47 660 17.8 8.4 12 33 5 682 16.9

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Balance Sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 526 270 255 16 32 891 51 64 777 596 295 4 603 573 295 278 10 2 1,303 55 105 1,143 913 390 1 681 606 326 280 20 2 1,482 56 115 1,311 1,040 442 743 677 387 290 22 2 1,817 116 141 1,560 1,154 663 977 761 421 340 25 2 2,547 113 254 2,180 1,603 944 1,311 857 468 389 30 2 3,288 227 317 2,744 2,024 1,264 1,684 44 293 337 248 18 603 44 401 446 210 25 681 44 513 558 167 19 743 44 687 731 220 26 977 44 1,050 1,094 170 47 1,311 44 1,465 1,510 120 55 1,684 FY07 FY08 FY09 FY10 FY11E FY12E

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Cash Flow Statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc)./ Dec in Fixed Assets (Inc)./ Dec in Investments (Inc)/ Dec in loans and advances Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY07 149 26 (310) 6 38 (178) (111) (4) 74 6 (34) 2 (22) (22) 267 225 12 39 51 FY08 189 33 (367) 3 45 (192) (49) 29 (41) 3 (58) (37) (36) 327 254 4 51 55 FY09 285 42 (168) 5 74 80 (32) 1 (10) 5 (36) (44) (44) 45 (43) 1 55 56 FY10 347 61 (249) 12 72 75 (52) (26) 12 (66) 53 (67) 64 51 60 56 116 FY11E 584 34 (621) 33 117 (153) (131) (113) 33 (211) (50) (89) 499 360 (3) 116 113 FY12E 682 47 (563) 33 136 (4) (104) (63) 33 (134) (50) (111) 413 252 114 113 227

January 31, 2011

Titan Industries | 3QFY2011 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Working capital cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 0.6 1.0 7.8 0.3 0.6 9.9 0.2 0.4 9.1 0.1 0.3 13.2 0.1 0.1 56.1 (0.1) (0.2) 57.4 4.4 92 16 92 42 5.5 105 12 100 35 6.5 107 10 101 34 7.3 103 9 94 36 8.7 100 9 89 40 9.7 105 10 93 43 29.1 30.7 38.9 32.2 33.5 36.9 36.7 39.2 32.7 39.1 40.1 38.9 49.0 47.8 51.2 44.1 46.3 41.9 7.9 74.8 4.2 25.0 6.1 0.7 39.1 6.9 76.4 5.2 27.6 6.9 0.4 36.9 6.8 74.0 5.9 29.6 11.3 0.3 34.4 7.2 79.3 6.1 34.5 10.4 0.2 38.5 8.9 80.0 6.1 43.6 4.1 0.1 47.1 8.4 80.0 5.9 39.8 6.3 (0.0) 39.2 25.2 25.2 31.0 5.0 32.6 32.6 40.1 8.0 36.9 36.9 46.5 10.0 56.5 56.5 70.2 15.0 164.7 105.2 105.2 112.8 20.0 246.5 122.9 122.9 133.5 25.0 340.1 137.7 106.4 111.7 45.6 0.1 7.5 81.7 25.8 86.4 34.5 0.2 5.2 64.8 22.8 93.8 74.6 27.6 0.3 4.0 51.0 20.8 61.3 49.4 21.0 0.4 3.3 39.0 15.9 32.9 30.7 14.1 0.6 2.5 26.0 11.8 28.2 26.0 10.2 0.7 1.9 21.6 9.1 FY07 FY08 FY09 FY10 FY11E FY12E

75.9 100.4 125.7

January 31, 2011

10

Titan Industries | 3QFY2011 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Titan Industries No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

January 31, 2011

11