{LONGTERMINVESTORS} Titan (SELL): Separating black from white still leaves it grey Demonetisation will shrink the predominantly cash-driven US$40bn Indian jewellery market by up to 30%. While unorganised players stand to lose more given low regulatory compliance, market share gains for Titan (4.7% now) will be a bumpy journey given cash accounts for 40% of its jewellery revenues. It will have to gain market share faster than the pace of market shrinkage to maintain revenue growth of 8% in FY18E. This will need repositioning of Tanishq to appeal to a larger audience (lower price points and gross margins) or introduction of a new mass brand (GoldPlus hasn’t succeeded in filling this space). Moreover, increasing regulatory scrutiny on gold/jewellery purchases poses challenges to getting new franchisees and, hence, implies risks (unquantifiable currently) to our revenue/earnings estimates (already downgraded by 11%/14%) for FY18E. Remain SELLers with a revised TP of Rs312. (Abhishek Ranganathan, CFA, +91

 Ambit -Titan (SELL): Separating black from white still leaves it grey
 
Demonetisation will shrink the predominantly cash-driven US$40bn Indian jewellery market by up to 30%. While unorganised players stand to lose more given low regulatory compliance, market share gains for Titan (4.7% now) will be a bumpy journey given cash accounts for 40% of its jewellery revenues. It will have to gain market share faster than the pace of market shrinkage to maintain revenue growth of 8% in FY18E. This will need repositioning of Tanishq to appeal to a larger audience (lower price points and gross margins) or introduction of a new mass brand (GoldPlus hasn't succeeded in filling this space). Moreover, increasing regulatory scrutiny on gold/jewellery purchases poses challenges to getting new franchisees and, hence, implies risks (unquantifiable currently) to our revenue/earnings estimates (already downgraded by 11%/14%) for FY18E. Remain SELLers with a revised TP of Rs312. (Abhishek Ranganathan, CFA, +91 22 3043 3085)
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CA Mihir Desai

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