TIMEX from AnandRathi
Anandrathi has increased the price target of TIMEX to 44
BUY Retail Timex Watches Limited We are updating our report on the stock with a revised price target of Rs 44 based on the excellent quarterly result and new initiative taken by the company. However, we are revising our revenue estimates up by 23% and 32% for FY08E and FY09E against our earlier estimates. This leads to change in PAT by 149% and 58% and EPS of Rs 1.2 and Rs 1.8 during the same period. Investment Positives: 1 Looking for retail tie up with Reliance retail meaning addition of 500+ new outlets in next one year. 2 The company’s renewed focus on the mid and high end segment of watches will help it to increase the average realization to increase the sales and expand the margins. 3 The new facility at Baddi, Himachal Pradesh with 2 mn units per annum will help the company to lower costs and make up for the demand which will be created by increasing the outlets and distribution channels as well as the growing sales volumes. 4 The inclusion of international brands for marketing, like - Nautica, Timberland and Versace in the already existing portfolio of FCUK and Opex will further increase the revenues and bottom line and shows the aggressive retail strategy adopted by the TWL which includes opening of another 100 retail stores by 2008. 5 Growing lifestyles coupled with higher disposable income, favourable demography and increasing retail and mall culture will be the key driver of growth in the sales. 6 We revise the sales and expect it to grow at 41% CAGR to Rs224 cr over the next two years and PAT to grow at 167% to Rs18 cr during the same period.
Valuation & Recommendation: At CMP of Rs 33.6, the stock trades at a P/E of 28x FY2008E CEPS and 19x FY2009E CEPS. We reiterate BUY with a long term view.
