Business Standard

Titan Industries: Gleam amid gloom

Excluding gold coins, the core jewellery business sales increased 13.6%, boosting segment margins and overall performance

Sheetal Agarwal  |  Mumbai 

Slowing discretionary demand and stricter norms on sourcing of its key input, gold, pulled down Industries’s performance for the quarter ended September. The performance, however, is reasonable, given the external environment and restrictions on imports, etc. With the management indicating that sourcing issues would ease and given that it is focusing on profitable growth, the market was impressed.

Titan’s stock, which has lagged the Sensex in the last few months, jumped 4.2 per cent to Rs 266.30 on Thursday. It trades at 28.6 times FY14 estimated earnings, and most analysts remain positive on the company and believe it is best placed to gain from revival in discretionary demand.



“We believe is well-equipped to brace the regulatory headwinds. It is sourcing from old jewellery, local refineries, copper mines (is a by-product) and State Bank of India (SBI)’s Deposit Scheme. It is also evaluating the exports option to meet the 80/20 norm. remains one of the best plays on discretionary consumption over longer term as it explores new under-penetrated high growth segments,” says Abneesh Roy, Consumer analyst at Edelweiss Securities.

Q2: Largely in-line
Though net sales, which grew 1.4 per cent year-on-year to Rs 2,290 crore, were short of Street expectations of Rs 2,535 crore, net profit at Rs 187 crore (up 3.6 per cent) was in line with expectations of Rs 190 crore.

To comply with guidelines, discontinued sale of coins from July 15. Adjusting for the same, total sales growth was at 8.4 per cent year-on-year, though still lower than consensus expectations of 12 per cent growth. Ebitda margin though came in higher at 11.4 per cent (up 38 basis points) against expectations of 10.3 per cent, aided by higher proportion of studded/diamond jewellery.

By the management, Dussehra sales were not very exciting. However, they have seen an improving trend in walk-ins since the past week and is hopeful of a pick-up on Dhanteras as well as the coming wedding season.

“Given the good monsoon across the country and a likely change in consumer sentiment, driven by stock market movement, we are hopeful of a good second half", says Bhaskar Bhat, managing director.

In line with the slowing demand, has reduced the pace of store additions and is focusing on improving same-store sales growth. The new store additions will be calibrated with a higher focus on store profitability. However, it will not reduce advertising activities.

shines
segment revenues (contributed 75-80 per cent to topline and 80 per cent to profits) grew 4.3 per cent to Rs 1,798 crore. Though growth was below analysts’ expectations of eight-10 per cent, excluding coins, sales increased 13.6 per cent, helped by 10.4 per cent grammage growth. Studded growth remained strong, aiding segment margins, which expanded 93 basis points to 13.4 per cent.

The watches business was hit on multiple fronts, namely, slowing discretionary demand, higher input cost and unfavourable exchange movements, resulting in highest volume decline of 22 per cent (year-on-year) in the watches business. Consequently, this segment’s sales fell 6.2 per cent to Rs 442 crore. Price rises, however, helped restrict the contraction in Ebit (earnings before interest and tax) margin, the same fell 109 basis points year-on-year to 10.5 per cent in the quarter.

Though small, other businesses (eyewear, precision engineering and accessories) grew 17.2 per cent year-on-year to Rs 114 crore; this segment’s Ebit loss declined 94.2 per cent to Rs 25 lakh.

After stricter norms around sourcing, Titan’s borrowings increased Rs 604 crore in the quarter to fund working capital needs of the business. This resulted in a 64 per cent surge in finance costs to Rs 20 crore. While the management remains confident on procuring supplies, the easing out of 80-20 scheme (domestic/export) is key to sustainable inventory levels. The company, which has received the go-ahead to import directly, expects to do so in the December quarter, which should ease sourcing issues.

A sharp rise in interest costs more than offsets higher other income (up 27.4 per cent to Rs 30 crore), restricting net profit growth to 3.6 per cent.

RECOMMENDED FOR YOU

Titan Industries: Gleam amid gloom

Excluding gold coins, the core jewellery business sales increased 13.6%, boosting segment margins and overall performance

Excluding gold coins, the core jewellery business sales increased 13.6%, boosting segment margins and overall performance Slowing discretionary demand and stricter norms on sourcing of its key input, gold, pulled down Industries’s performance for the quarter ended September. The performance, however, is reasonable, given the external environment and restrictions on imports, etc. With the management indicating that sourcing issues would ease and given that it is focusing on profitable growth, the market was impressed.

Titan’s stock, which has lagged the Sensex in the last few months, jumped 4.2 per cent to Rs 266.30 on Thursday. It trades at 28.6 times FY14 estimated earnings, and most analysts remain positive on the company and believe it is best placed to gain from revival in discretionary demand.

“We believe is well-equipped to brace the regulatory headwinds. It is sourcing from old jewellery, local refineries, copper mines (is a by-product) and State Bank of India (SBI)’s Deposit Scheme. It is also evaluating the exports option to meet the 80/20 norm. remains one of the best plays on discretionary consumption over longer term as it explores new under-penetrated high growth segments,” says Abneesh Roy, Consumer analyst at Edelweiss Securities.

Q2: Largely in-line
Though net sales, which grew 1.4 per cent year-on-year to Rs 2,290 crore, were short of Street expectations of Rs 2,535 crore, net profit at Rs 187 crore (up 3.6 per cent) was in line with expectations of Rs 190 crore.

To comply with guidelines, discontinued sale of coins from July 15. Adjusting for the same, total sales growth was at 8.4 per cent year-on-year, though still lower than consensus expectations of 12 per cent growth. Ebitda margin though came in higher at 11.4 per cent (up 38 basis points) against expectations of 10.3 per cent, aided by higher proportion of studded/diamond jewellery.

By the management, Dussehra sales were not very exciting. However, they have seen an improving trend in walk-ins since the past week and is hopeful of a pick-up on Dhanteras as well as the coming wedding season.

“Given the good monsoon across the country and a likely change in consumer sentiment, driven by stock market movement, we are hopeful of a good second half", says Bhaskar Bhat, managing director.

In line with the slowing demand, has reduced the pace of store additions and is focusing on improving same-store sales growth. The new store additions will be calibrated with a higher focus on store profitability. However, it will not reduce advertising activities.

shines
segment revenues (contributed 75-80 per cent to topline and 80 per cent to profits) grew 4.3 per cent to Rs 1,798 crore. Though growth was below analysts’ expectations of eight-10 per cent, excluding coins, sales increased 13.6 per cent, helped by 10.4 per cent grammage growth. Studded growth remained strong, aiding segment margins, which expanded 93 basis points to 13.4 per cent.

The watches business was hit on multiple fronts, namely, slowing discretionary demand, higher input cost and unfavourable exchange movements, resulting in highest volume decline of 22 per cent (year-on-year) in the watches business. Consequently, this segment’s sales fell 6.2 per cent to Rs 442 crore. Price rises, however, helped restrict the contraction in Ebit (earnings before interest and tax) margin, the same fell 109 basis points year-on-year to 10.5 per cent in the quarter.

Though small, other businesses (eyewear, precision engineering and accessories) grew 17.2 per cent year-on-year to Rs 114 crore; this segment’s Ebit loss declined 94.2 per cent to Rs 25 lakh.

After stricter norms around sourcing, Titan’s borrowings increased Rs 604 crore in the quarter to fund working capital needs of the business. This resulted in a 64 per cent surge in finance costs to Rs 20 crore. While the management remains confident on procuring supplies, the easing out of 80-20 scheme (domestic/export) is key to sustainable inventory levels. The company, which has received the go-ahead to import directly, expects to do so in the December quarter, which should ease sourcing issues.

A sharp rise in interest costs more than offsets higher other income (up 27.4 per cent to Rs 30 crore), restricting net profit growth to 3.6 per cent.
image
Business Standard
177 22

Titan Industries: Gleam amid gloom

Excluding gold coins, the core jewellery business sales increased 13.6%, boosting segment margins and overall performance

Slowing discretionary demand and stricter norms on sourcing of its key input, gold, pulled down Industries’s performance for the quarter ended September. The performance, however, is reasonable, given the external environment and restrictions on imports, etc. With the management indicating that sourcing issues would ease and given that it is focusing on profitable growth, the market was impressed.

Titan’s stock, which has lagged the Sensex in the last few months, jumped 4.2 per cent to Rs 266.30 on Thursday. It trades at 28.6 times FY14 estimated earnings, and most analysts remain positive on the company and believe it is best placed to gain from revival in discretionary demand.

“We believe is well-equipped to brace the regulatory headwinds. It is sourcing from old jewellery, local refineries, copper mines (is a by-product) and State Bank of India (SBI)’s Deposit Scheme. It is also evaluating the exports option to meet the 80/20 norm. remains one of the best plays on discretionary consumption over longer term as it explores new under-penetrated high growth segments,” says Abneesh Roy, Consumer analyst at Edelweiss Securities.

Q2: Largely in-line
Though net sales, which grew 1.4 per cent year-on-year to Rs 2,290 crore, were short of Street expectations of Rs 2,535 crore, net profit at Rs 187 crore (up 3.6 per cent) was in line with expectations of Rs 190 crore.

To comply with guidelines, discontinued sale of coins from July 15. Adjusting for the same, total sales growth was at 8.4 per cent year-on-year, though still lower than consensus expectations of 12 per cent growth. Ebitda margin though came in higher at 11.4 per cent (up 38 basis points) against expectations of 10.3 per cent, aided by higher proportion of studded/diamond jewellery.

By the management, Dussehra sales were not very exciting. However, they have seen an improving trend in walk-ins since the past week and is hopeful of a pick-up on Dhanteras as well as the coming wedding season.

“Given the good monsoon across the country and a likely change in consumer sentiment, driven by stock market movement, we are hopeful of a good second half", says Bhaskar Bhat, managing director.

In line with the slowing demand, has reduced the pace of store additions and is focusing on improving same-store sales growth. The new store additions will be calibrated with a higher focus on store profitability. However, it will not reduce advertising activities.

shines
segment revenues (contributed 75-80 per cent to topline and 80 per cent to profits) grew 4.3 per cent to Rs 1,798 crore. Though growth was below analysts’ expectations of eight-10 per cent, excluding coins, sales increased 13.6 per cent, helped by 10.4 per cent grammage growth. Studded growth remained strong, aiding segment margins, which expanded 93 basis points to 13.4 per cent.

The watches business was hit on multiple fronts, namely, slowing discretionary demand, higher input cost and unfavourable exchange movements, resulting in highest volume decline of 22 per cent (year-on-year) in the watches business. Consequently, this segment’s sales fell 6.2 per cent to Rs 442 crore. Price rises, however, helped restrict the contraction in Ebit (earnings before interest and tax) margin, the same fell 109 basis points year-on-year to 10.5 per cent in the quarter.

Though small, other businesses (eyewear, precision engineering and accessories) grew 17.2 per cent year-on-year to Rs 114 crore; this segment’s Ebit loss declined 94.2 per cent to Rs 25 lakh.

After stricter norms around sourcing, Titan’s borrowings increased Rs 604 crore in the quarter to fund working capital needs of the business. This resulted in a 64 per cent surge in finance costs to Rs 20 crore. While the management remains confident on procuring supplies, the easing out of 80-20 scheme (domestic/export) is key to sustainable inventory levels. The company, which has received the go-ahead to import directly, expects to do so in the December quarter, which should ease sourcing issues.

A sharp rise in interest costs more than offsets higher other income (up 27.4 per cent to Rs 30 crore), restricting net profit growth to 3.6 per cent.

image
Business Standard
177 22

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard