Morgan Stanley on Titan Industries

Morgan Stanley raises the target price of Titan Industries to Rs 2,032 implying 12% upside. They have also raised the earnings estimates by 6%, 5% and 5% for F2010, F2011 and F2012 respectively.

Interestingly, despite fewer wedding dates this quarter, consumer off take in the jewellery business remains strong driven by strong consumer confidence, successful promotion in studded jewellery, lower gold prices compared to Q3F2010 and low base effect. Similarly, the watches division is also demonstrating strong growth due to strong retail off take, new store openings and low base effect of Sonata watches. Titan plans to add around 50,000 sq ft p.a. in its jewellery business in F2011, implying around 15-20% space growth. This will be led by a combination of large and small format stores. Similarly, in the watches division, along with expansion with multi-format stores, the company plans to add around 30-40 new “World of Titan” stores in F2011 translating into 12% space growth in the watches division. Morgan Stanley reiterates `Overweight’ rating on:

1) Good business model (high RoE with strong cash flows).

2) High growth potential due to under penetration levels.

3) Proactive and dynamic management., and

4) good quality financials.