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라케시 준준왈라의 2001년 타이탄 투자 배경을 분석한 교육 영상으로, 저평가 가치투자 관점에서 타이탄의 과거 실적 악화와 자산가치를 검토한다. [투자 배경] 준준왈라는 2001~2002년 주가가 30~35루피 부근일 때 타이탄을 매수한 것으로 소개된다. 당시 주가는 2001년 9월 8년 저점인 29루피를 기록했다. [사업 성장성] 주얼리 사업은 연 30% 성장 중이었고 타니시 매장은 52개로 늘었으며, 경영진은 비용 절감과 구조조정을 추진했다. [실적 악화] FY2002~2003 세후이익은 각각 44%, 53% 감소했고 주당순이익은 60% 하락했다. ROE와 ROCE도 역사적 최저 수준으로 떨어졌다. [자산가치 분석] 순유동자산은 396억 루피로 주당 94루피가 계산되어 당시 주가 50루피의 약 두 배였다. 그러나 장기부채와 우선주를 반영한 벤저민 그레이엄식 NCAV는 주당 -26루피다. [수정 비율] 부채를 모두 상환하는 가정에서 유동자산 비중은 53%로 높았으나, 2021년 기준으로는 2%에 그쳤다. [리스크] 호수르 공장 직장폐쇄, 낮은 영업이익률(3~4%), 낮은 자본 효율, 높은 부채가 주요 위험 요인으로 제시된다. [교훈] 재무제표 항목의 구분 이해, 외부 요인에 따른 단기 주가 변동 활용, NCAV를 여러 신호 중 하나로 보는 접근이 강조된다. [결론] 영상은 과거 사례를 교육 목적으로 분석하며, 특정 종목의 향후 가격 방향에 대한 예측은 제시하지 않는다.
다듬은 글
for the most recent corporate shareholders filing rakhi chunjinwala and associates own about 5.1 percent of the outstanding shares in titan company limited this minority stake accumulates to over eleven thousand crores which makes a one third of what the zhunjin wallace own in publicly listed stocks now the rakei chunyanwala titan love story is well into its 20th year and when he was asked what he saw in the company here's what he had to say and i think the titan itself is surprised by the kind of opportunity they are seeing right and i thought titan is well entrenched nobody could come in to watch business they are a very good marketing company i thought branding business in jewellery will eventually succeed and navigate my investment strategy is an entry value a constant review and a perceived exit value which changes with every review right so it's not that i knew when i invested in titan you know when i invest in titan 30 to 30 rupees started investing i thought i got a price of 250 in five months five years uh of course now about eight years have passed i never thought the sales will be in four figures but once i interacted i invested in six months i had an opinion that this stock will go to four figures and i bought up to 150 160.
now this clip this interview happened in 2009 and while he said some really nice things about titan the phrase that really caught our attention was the entry price that he paid for the company which was around the 30 rupee mark so for this video we shall try to gauge the kind of calculations that mr zhunjanwala might have done or might not have done when he first invested in this talk all those years back this video is an expiration and through this examination of titan we hope to bring forth one of the basic filters of value investing as today's lesson let's begin the 2002 period was not an easy one for titan industries limited on the external front the market conditions were depressed competition was on the rise and the price of raw materials especially gold had gone up by quite a bit internally the management had locked hans with the employee union leading to a lockout in the hosur factory which had further dented the company's revenues and profits in numbers the results posted for fy 2002 and fy 2003 were amongst the worst in over a decade of titan's operations the after tax profit had declined by 44 percent and then again by 53 in these two years the earnings per share had declined by 60 and as a result of all this the management had to make big cuts in the dividend payout the return on equity and the return on capital employed had dropped drastically to levels never seen in the company's history and titan's share price had touched an eight-year low of 29 rupees in september of 2001.
net net the 2001 2002 period was a rather nervous time to be a shareholder in titan industries limited but not for mr jun jhanwala who started buying shares in the company at somewhere around the same time when the price was around the 30 to 35 rupee mark in essence he saw something in the company that he liked or as madame curie once very beautifully said nothing in life is to be feared it is only to be understood so what could be some of the things that mr junyan walla might have understood and liked about titan well for one titan's jewelry business was showing a lot of promise with an annualized growth rate of 30 percent it was profitable tanish had grown to 52 stores the company was introducing innovative schemes and there was enough evidence that jewelry was going to be the mainstay of the business for the next many years a second area where the management was putting in a lot of effort was in reducing costs and in streamlining operations in fact in this 2001-2002 period the company addressed a number of projects like the implementation of a vrs for 600 employees the restructuring of titans european operations projects on working capital reduction and a host of other cost saving initiatives which were likely to have a long-term impact on the company's bottom line so to put it together titan industries during this period seem to be at a point of inflection and with the identification of growth runways the efficiency building initiatives and the rising consumer confidence titans seem to be poised for the next stage of growth but the real question for us is were these indicators and growth promises enough to invest in the company or was there something in titan's valuation that made the decision to invest a lot easier to understand this better we shall now examine the financials of the company for which we'll make use of titan industries fy 2002 2003 annual report so we established earlier that titan industries net profits dividends and their earnings per share had fallen sharply in fy 2002 and again in fy 2003 and while profitability drops in the 40 50 range are never easy to swallow it does become a lot clearer when we examine the profit and loss statement in its entirety now notice here that the gross profit and the operating profit are more or less there the gross profit is between 79 and 87 crores while the operating profits are in a closer band of 15 to 18 crores in essence titan's operating business is a lot more stable than what the net profit numbers might be showing in fact do notice that the biggest contributor to the drop in net profits in fy 2003 was a 10 crore provision that the company had kept towards the restructuring of european operations so if we ignore the one-off gains the one-off losses and the provisions then the company is still a steady ship and an investor like rakhi chun jinwala would have surely noticed that now in addition to financial stability we think there is a second premise which is worth an exploration in fact what we are discussing now is the core of this video and the concept i'd like to put forward is called the net current asset value the net current asset value or ncav was developed by benjamin graham in the 1930s and is computed using four items from a standard balance sheet which are the net current assets with the company the amount of preference share capital the non-current debt or long-term debt of the company and the number of outstanding equity shares let's start with the net current assets and if this phrase is new to you all it means is the difference between the current assets and the current liabilities in a company so very quickly a current asset is any item that a company holds which can be easily converted into cash and that too within a 12-month period this would include things like raw materials finished goods any loans that you've given to suppliers furniture work tools and of course the cash and bank balances that are available with the company likewise current liabilities are a company's short-term financial obligations that are typically due within a few months or within a normal operating cycle items that would be labeled as current liabilities would include the companies short-term creditors money kept aside for provisions for paying dividends etc so in the case of titan industries the net current assets as on 31st of march 2003 came to 396 crores now one way of looking at this number is that if titan were to be closed down on the 31st of march 2003 for any reason the company would still be able to quickly put together an amount of 396 crores after disposing of its current assets and paying off its current liabilities of course there are some assumptions here that all debtors would pay up and the company would get the market price for the inventory etc but nevertheless let's stick to this 396 crores for now now the company had issued 4.22 crores of equity shares which means on a per share basis this number comes to 94 rupees which is very interesting because the price of one share of titan at that time was only 50 rupees this effectively means that the liquidation value of titan's net current assets was almost double of titan's market capitalization in essence titan industries was looking a lot like a value stock which not only had a growing profitable dividend paying business but it also gave investors a reasonable margin of safety from a valuation standpoint now a scenario like this might be rather comfortable for someone like me or maybe even for mr junjianwala but for benjamin graham the ncav of a company was a bit more than this you see ben graham wanted the liquidation value to reflect not just the current liabilities but all sorts of debt that the company might have including the preferred stock that the company had issued which means in the case of titan in addition to the net current assets we now need to incorporate the long-term debt and the preference share capital of the company which came to 467 crores and 40 crores respectively when we plug in those numbers we see that our ncav per share falls from a delicious 94 rupees that we had earlier calculated to negative 26 rupees per share you see benjamin graham's version of the ncav is a very conservative one which is not entirely a bad thing but it does make stock picking using this framework a lot more difficult it was probably easier in the 1930s and 1940s to find companies where the net current assets were a lot more than the market cap and debt but discovering companies using this metric is a lot tougher now in fact when we took a standard screener and applied the ncav formula to all listed companies in india which had a market cap of over 1000 crores we found just two companies that satisfied this criteria but let's come back to titan and let's see if we can reject some of the elements we have just learned and if we can make some sense out of it let's start with the basic premise and assume that you want to buy the entire company that is all hundred percent of it which means you have to not just pay for the equity shares in the company but you have to also extinguish the entire debts that there in the company's books and with this we have the denominator now for the numerator we'll use the remaining two elements of the ncav formula that is the net current assets and the preferred stock which represents what the company can quickly accumulate in the event of a liquidation so in the case of titan this ratio comes to 53 which is an extremely healthy number in terms of the stock's attractiveness for a value investor and that's because this number 53 represents that portion of a company's valuation that is purely based on the fairly liquid assets that the company has this means the company's valuation is yet to incorporate other important factors like the company's growth prospects its profits assets held by the company long-term investments cash flows etc in fact to give you an idea of how big this 53 is our researchers applied the same ratio on over 1 000 companies that have a market cap of over 1 000 crores and what came out were just 10 companies where this ratio was over 53 percent and when we applied this ratio on titan industries using the 2021 numbers this ratio came to a mere two percent so to put this all together we have discussed two mathematical methods in this video the first one was the ncav per share approach where we looked at net current assets in isolation and we also looked at the benjamin graham version and the second method we looked at was a modified ratio which explains how much of a company's valuation is represented by the fairly liquid assets that the company holds now it's important to note that neither approaches can be applied on a standalone basis and methods like the ncav should be treated as one of the many signals that determine whether one should enter or exit a stock so what would have been rakesh junjianwala's investment thesis for titan in 2001-2002 on the positive side mr junjianwala would have seen a company whose share price is depressed and might be available at delicious valuations a company whose revenues are growing for the last 15 years has an established brand name has been profitable for decades and barring the last two years has been giving a high return on equity on the negative side any investor would need to factor things like two years of poor profits that factory lockout which might jeopardize future profits low profit margins of just three to four percent low return on capital employed and of course the high levels of debt in its books but beyond these pros and cons our exploitation of titan industries also gave us some worthwhile lessons that we can take with us lesson one would be on the importance of understanding different components of the financial statement and in this context we examine the profit and loss statement where while the net profits were showing a dramatic drop the operating profits of the company were rather stable the second lesson lesson two that we can carry from this video is the sensitivity of stock prices due to external factors which may not really play out over the long run for example we talked about that factory lockout in hosur now this lockout happened in the month of february 2003 and between january of 2003 and march of 2003 the stock price of titan went down by 22 which might present a good buying opportunity to an aware investor because all said and done lockouts don't last long and eventually the unions and management would have negotiated and resolved this conflict and the third and most important lesson we learned was on the use of ncav or net current asset value as a valuation tool and with this we come to the end of this video i hope you found this video useful and learned something new in the process if you liked what you saw then don't forget to share this video with your friends and connections do subscribe to the et money channel tap on that like button and i'll see you next week with another insightful video until then mutual fund investments are subject to market risks read all scheme related documents carefully
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