1) Mahindra & Mahindra (M&M):
- Booking for Scorpio N has started recently and at the first minute of the start of the booking, around 25,000 vehicles have been booked.
- And in the first 30 minutes, around 1 lakh have been booked. This record was set by Mahindra XUV700 which recorded 1 lakh bookings in the first 57 minutes.
- On average if the ex-showroom price of the car is estimated to be around Rs. 18 lakh, then the total revenue from 1 lakh vehicles will be around Rs. 18,000 Cr.
- The initials 20,000-25,000 vehicles will be made available at introductory prices and the company will not be able to earn high profits from there.
- By December 2022, the company expects to deliver the first 20,000 Scorpio N and the delivery of these vehicles will start on 26th September 2022.
- In Q4FY22, the company was having Operating Profit Margin (OPM) of around 18% and for FY22 it was around 17%.
- Considering the raw material inflation and other factors, if we assume the OPM of around 15% to 16%, then the Operating Profit from this booked 1,00,000 vehicles, the company could generate an operating profit of Rs. 2,500 Cr. to Rs. 2,700 Cr.
- Net Profit in Q4FY22 was around Rs. 2,200 Cr. and in the coming quarters, Mahindra & Mahindra might report the highest ever quarterly profits.
- The company’s recent model launch, increasing profitability from XUV700, and increased sales of tractors due to good monsoon have provided the company with strong revenue and profit visibility.
- Talking about Electric Vehicles (EVs) plans, the company does not look quite aggressive.
- In the SUV segment, M&M might improve the market share in the category.
- Maruti Suzuki has also planned new SUV launches in the near to mid-term.
2) Titan’s Global Ambitions:
- There are several investment options like Gold, Silver, Diamond, etc. but the average returns from these investments over the longer term remain at around the rate of inflation.
- But it has been observed that higher returns have been generated from the Jewellery business of the concerned commodities like gold, silver, etc. rather than investment in direct commodities.
- Titan Industries is one such Jewellery company which have yielded significant returns in the past. On a CAGR basis, the stock of Titan Company Limited has yielded returns of over 25% in the last 10 years.
- Also, the current ambition of the company toward overseas expansion looks quite good.
- Overall, Titan generates the majority of its revenue i.e., 88% from its Jewellery business segment ‘Tanishq’.
- Eyewear, Watches, and other segments generate only around 12% of the total revenue as of FY22.
- Since the Jewellery market in India is highly unorganized, the brand ‘Tanishq’ has a very higher acceptance in the market among the branded players.
- The global Jewellery Industry is expected to grow at the rate of 8.5% CAGR in the next 8-9 years from $249 billion and $519 billion. Among this growth trajectory, the growth rate of unorganized players will be lesser than that of branded/organized players due to the shift from the unorganized sector to the organized sector.
- Titan has total stores (inclusive of all the businesses) of around 2,303 stores across 366 towns spreading over 2.9 million sq. ft. As of Q1FY23, Tanishq is having around 395 stores.
- The Jewellery business of Titan i.e., Tanishq has reported a CAGR revenue growth of 19.2% over the last 5 years surpassing the overall growth of the consolidated business i.e., 13%-14%. The EBITDA margin of the company from the Jewellery business is around 13% which is consistently rising.
- Now, the company is eyeing the global market via its Jewellery business and will be targeting Non-Resident Indians (NRI) and Persons of Indian Origin (PIO).
- NRI’s and PIOs are present across the globe whether it is America, Europe, Gulf Countries, or others. Also, the Per Capital Income of such individuals is around $1,00,000 per annum. Whereas the Per Capita Income of US Citizens is around $65,000. Hence, NRI and PIOs are having larger per capita income than the category average and hence such individuals have higher disposable incomes.
- Tanishq has already opened 3 stores in Dubai which is getting good traction and the 4th store will be opened soon. Tanishq will also store in the US very soon and will increase over a period. Further, the management has forecasted that it will open around 20 new stores in the US in the next 3 years. As per the management analysis, revenue from 1 US store will be double that of revenue from 1 store in India.
- Currently, the international operations of Titan contribute a lower single-digit share to the overall revenue of the company, but with the growth in the international market, it might rise in the coming years to around double-digit growth.
What Should Investors Do?
The Auto companies who are launching or planning to launch new vehicles specifically in the SUV segment like Tata Motors, Maruti Suzuki, M&M, etc. should be on the close radar of the investors. In the context of Titan, the company’s expansion plans of its Jewellery business ‘Tanishq’ into international boundaries is an interesting step by the company which provides a good earnings growth for the company in the longer period. Titan’s expansion plans within the international boundaries look positive for the company. Hence, the stocks discussed above are having some growth prospects in the future and therefore these stocks should be on individuals’ radars.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.