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Kamis, 17 Juni 2010

TTitan Industries - best stock in Consumer Durables for long term

Titan Industries - best stock to buy now

This article plans to convince the reader with facts that Titan industries is one of the best stock available in Consumer durables, (or even when compared to stocks in other sectors). This stock was listed as the Best stock to buy in 2009, and since Jan 2009 (when that post was written) the stock has gained over 150% (as compared to 80% returns given by the index over the same period). The core business of Titan Industries is manufacturing and retailing of wrist watches and Gold jewelry (Tanishq). Titan is also emerging as an important player in Eye-wear retailing (Titan Eye Plus). Below is a review of Titan Industries (including comments about its subsidiaries Tanishq and Titan Eye +), its financials, risk and business outlook.

Titan World - Wrist Watches

The current core business of Titan Industries, Titan Watches is expected to grow at the rate of 20%-25% in the coming few years. One biggest plus point of Titan, is that being a market leader, it enjoys a competitive advantage. Moreover, the management takes continuous efforts to maintain/increase market share, for example:
  1. Titan Releases one stylish watch design every month.
  2. Titan, with the recent launch of Titan Zoop has aggressive plans in place to capture the currently untapped market for kids watches.

Tanishq - Gold and other Jewelery

Tanishq is a fully owned subsidiary of Titan Industries. Tanishq expects its topline to grow by 30% to 40% in the coming few years, faster than the watch segment. The market for Jewelery in India is evergreen and growing and although there is high competition in this segment, Tanishq is the only player selling branded products.

Titan Eye +

Titan was again quick to realize that the market for Eye-wear - frames, glasses and lenses, also lacks branded items. Titan Eye + or Titan Eye plus is a fully owned subsidiary of Titan Industries and being an extremely new player has more scope for growth. Titan Eye plus currently has 85 stores across 42 cities. It plans to expand this to 300 stores in the next 3-4 years. I expect margins to significantly improve in the coming 3 for years, so the bottomline will grow faster than the topline.

Titan Industries - Financial ratios, Risks and drawbacks

Here are the key financial ratios of Titan industries.
  1. ROE of about 30%, consistently in the past 5 years.
  2. Long term debt equity ratio of 0.2.
  3. Operating Profit Margins have been slightly above 8% which is not bad as compared to other retail industries.
  4. P/E ratio of about 39 (At the current Market price of 2200). This is a bit high and thus the stock may not be an excellent buy from short term or medium term perspective.
Thus the meaning of "BEST Stock" in the title should be understood as Best stock for Long term investment (3 to 5 years or more). It is best to 'accumulate' this stock, i.e. buy on every dips in small portions, rather than buy lump-some.

Titan Industries - overseas expansion plans

Titan watches have a strong market presence in South East Asia and Middle East and some African countries like Kenya. About 10% of its revenues from watch segment come from outside. However recently Titan has clarified that it has put its plans to expand overseas on hold (read Titan news ). Its attempt to launch brand Tanishq in United States has failed to obtain the desired response and hence the stores have been closed. Although currently Titan is focused on the Indian Market, since it is constantly looking for growth opportunities, may think of overseas acquisition or expansion plans especially in China and Russia. In any case, this is the kind of stock that I like to buy and hold, without worrying too much about market movements (after I have bought the stock). Disclosure- I have started buying this stock in small portions. I plan to buy a big chunk if the price falls below Rs. 2000.


Recent Posts related to the theme "Best Stocks to Buy Now" (2010)


Stocks which were "Best Stocks to Invest" for year 2009, but now, the analysis may or may not apply, as prospects for the current year have changed.
Posts on Investment Basics
  • Understanding the P/E Ratio
  • Return on Equity (ROE), ROCE and Shareholder's Equity
  • Consolidated results vs. Standalone Results.
  • Topline Growth vs Bottomline Growth

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