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 Titan Industries’s performance for the quarter ended September. The performance, however, is reasonable, given the external environment and restrictions on gold imports, etc. With the management indicating that gold 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 Titan is well-equipped to brace the regulatory headwinds. It is sourcing gold from old jewellery, local refineries, copper mines (gold is a by-product) and State Bank of India (SBI)’s Gold Deposit Scheme. It is also evaluating the gold exports option to meet the 80/20 norm. Titan 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 RBI guidelines, Titan discontinued sale of gold 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, Titan 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.
The Oberoi Realty stock recovered after falling 3% in the morning trade on September quarter results that were below expectations