Titan Industries Ltdhas launched its fragrance brand, Skinn. This marks the first foray into personal care category. It plans to invest Rs 50 crore over next three-five years on this, largely on branding, marketing activities, as it will not be manufacturing the product. Titan is targeting a turnover of Rs 250 crore in the next three-five years.
As per Euromonitor, fragrances in India is a R850- crore category as on CY12 and is expected to reach R1,250-crore size, a CAGR of 13.7% by CY15.Titan is also looking to enter the helmet category. We believe the launch will likely happen in FY14 itself. In our view, it is likely attempting to de-risk the long term business model from the vagaries of cyclical jewellery business, which incidentally has been facing multiple headwinds in the past 12-18 months due to precarious CAD situation.
We believe Titan’s new category entry will provide diversification vs vagaries of jewellery business, given the size of such categories and scale of Titan’s jewellery business, it will be long before such categories assume relevance from an investment viewpoint. For example, despite 40% plus CAGR since FY08-13, Eyewear contributes <3% of Titan’s revenues. We don’t expect new segment entry to materially change the P&L composition of in the medium term.
Given the near-term challenges in its core business, we retain our neutral rating on Titan with a TP of R240 (23x FY15). Sharp downside in gold prices and incremental regulatory actions constitute key risk to our rating.