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Titan – On the fast track - Views on News from Equitymaster
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  • Sep 6, 2000

    Titan – On the fast track

    Titan, the most admired brand in India (as per A & M magazine), is set to move on the fast track. A notable shift is happening over the last two years in the sales mix and focus of the management.

    The company has reported a 15% volume growth in watch sales with average realisation of Rs 753 per watch sold in FY00 compared to Rs 734 in FY99, a growth of 2%. The cumulative sales of the watch division currently stand at Rs 4,740 m in FY00 compared to Rs 3,755 m in FY99. The company has increased the “The world of Titan” outlets to 115, multi-branded outlets to 110 and authorised dealers to 5,800 thus covering 71 cities and 58 towns.

    There has been a notable change in the sales mix of Titan Industries.

    SALES MIX FY98 FY99 FY00
    % of sales (watches)* 79.0% 78.0% 70.0%
    % of sales (jewelry) 14.0% 15.0% 24.0%
    % of sales (Clocks)* 2.0% 2.0% 1.0%
    Total** 95.0% 95.0% 95.0%
    *includes traded sales
    ** the remaining 5% of sales consitute income from services, sales of scrap etc

    While the watch sales as a percentage of total sales has come down from as high as 79% in FY98 to 70% for FY00, the company has been concentrating more on the jewelry division. Jewelry division’s sale as a percentage of total sales has shot up to 25% in FY00 from 14% in FY98. The average realisations have moved up sharply by 15% to Rs 5,100 per unit in FY00 compared to Rs 4,434 in FY99. The jewelry division attained break-even in the current year. The contribution from this division is expected to increase as these could act as a substitute to the gold-gift segment, which is a high growth area.

    The outlook for the current year is encouraging. The successful implementation of ERP/SAP would enable the company to coordinate the supply chain management across the watch division for which it has invested Rs 53 m in the last year. This initiative is expected to bring significant benefits in the coming years. However, competition is intensifying with the entry of Swiss and Japanese majors like Casio, Seiko, Swatch Citizen and Casio. Moreover, the black market for watches is huge as it accounts for more than 60% of total industry sales.

    Nevertheless, Titan has planned to increase the number of exclusive showrooms, dealer outlets and multi-brand centres to cater the rural market also. It has also launched two new sub-brands named Nebula and Dash targeting the gold strapping market and youth market respectively. With its plan to enhance presence in the European and Middle East market, surely, the company is set to move on the fast track.

    The stock is currently trading at Rs 57.5 at a P/E multiple of 13 on FY00 earnings. The market capitalisation as a percentage of sales works out to 0.39 (Market cap = Rs 2431 m).



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