"Titan Industries' (Titan) has registered a sharp revenue growth of 45% to Rs 20.9 billion in FY07, driven by 64% growth in jewelry business and 20% in the watches business. As the revenue mix moved in favour of relatively lower margin jewelry operations, EBITDA margins dipped by 120bp to 9.5%. PAT (pre contingencies of Rs 240 million) has grown by 18%. Contingencies include write off of design rights (Rs 76 million), interest cost adjustment (Rs 45 million) and valuation adjustments of overseas subsidiaries (Rs 130 million)."

"Product innovation (in watches & jewelry), rapid scale up of retail operations and addition of new avenues like eye-care and precision engineering, will continue to aid top-line growth. We expect the watch business to grow at 15% and the jewelry business to grow at 25% as consumers move towards organized shopping and Titan scales up its retail operations (240 World of Titan showrooms, 98 Tanishq and 25 Gold Plus stores by end of FY08). Titan has also forayed into prescription eyewear market (Rs 25-30 billion business) through its brand - Titan Eye+ and has plans to reach 15 stores by end of FY08. Titan's precision engineering business is expected to grow at 80% CAGR over the next three years. While growth will be driven by multiple avenues, margins will expand on the back of favourable product mix - Titan over Sonata, studded jewelry over pure gold jewelry and growth of high margin precision engineering and eyewear retailing businesses. Titan currently trades at valuations of 19.8x FY09E earnings, 13.0x EV/EBITDA, 1.4x EV/Sales. Maintain Outperformer with a price target of Rs1,100."