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| Titan: Chiming in sales growth |
| Jitendra Kumar Gupta & Sunaina Vasudev / Mumbai Feb 04, 2010, 00:23 IST |
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Demand-driven growth in key segments boosts performance.
 The return of the consumer in the December quarter helped Titan Industries post its first double-digit growth in a year, with demand returning to both key segments — jewellery and watches. A relatively longer wedding season and lower gold prices (as compared to the previous year) boosted jewellery sales nearly 34 per cent. Revenue from watches rose 25 per cent from the year-ago period, the sharpest growth in over ten quarters, due to a turnaround in large retail formats and individual distributor demand.
Titan saw sales grow nearly 30 per cent to Rs 1,334 crore. Lower finished goods costs and employee expenses helped expand earnings before interest, tax, depreciation and amortisation (Ebitda) margins to 8.27 per cent, a 236 basis points (bps) expansion compared to the corresponding quarter last year. Ebitda increased 82 per cent to Rs 110 crore. Profit after tax tripled to Rs 75.4 crore.
Segment-wise, Ebit margins rose 720 bps for watches to nearly 14.7 per cent, while jewellery margins expanded 62 bps to over 7 per cent. However, Titan’s other businesses continued to struggle, posting a 7 per cent decline in revenues and a 12 per cent dip in profits, because of deferred and cancelled orders in its precision engineering division.
Titan is putting greater thrust on diamond jewellery and expects its share to move up from the current 25-30 per cent to 40 per cent in the next five years. It is increasing the number of stores and experimenting with larger retail formats. Analysts expect that volume-led sales growth impetus will continue at the current pace, with some margin expansion coming from the thrust on diamond jewellery.
The watches segment is expected to grow at a slower pace, while margin improvements will drive the bottom line, say analysts, as the company is expected to shift focus and manufacturing to premium brands.
The stock has seen universal earnings per share (EPS) upgrades by analysts and closed at Rs 1,732 on Wednesday, 3.6 per cent higher than the previous close at about 26.6x consensus analyst FY11 EPS estimates.
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