Titan Company gains post September quarter results

The stock was up by 4% at Rs 883, recovering 5% from its early morning low of Rs 842 on the BSE.

Shares of Titan Company were up by 4% at Rs 883 per share on the BSE after the company’s jewellery division reported a strong 29% year-on-year (Y-o-Y) revenue growth in September quarter (Q2FY19) despite the muted growth witnessed by the industry. The stock recovered 5% from its early morning low of Rs 842 on the BSE.

The company said most of the growth in jewellery segment coming from 24% volume growth. Gross margin was lower than the previous year as plain jewellery segment grew much faster than the studded segment, leading to the studded ratio of only 35%, compared to 37% in the previous year. Advertising spend in the reporting quarter was also substantially higher (partly due to shift in campaigns from Q1) than the previous year, the company said.

Titan Company has reported an 8% Y-o-Y growth in its consolidated net profit at Rs 3.01 billion, on back of 26% jump in consolidated revenue of Rs 45.95 billion over the previous year quarter.

The company’s standalone profit grew 3% Y-o-Y at Rs 3.14 billion, despite a 26% rise in the operational revenue during the quarter. The company said the profit before tax for the quarter was muted due to a provision made to the tune of Rs 290 million for investments made as part of Treasury operations in inter-corporate deposits in the IL&FS group and certain one-time franchisee compensations on store takeover in the jewellery segment.

Analysts at ICICI Securities believe Titan Company’s business model has the inherent strength that would enable it to capitalise on larger opportunities like wedding jewellery (increase contribution from 35% in FY18 to 50% by FY23) thereby providing impetus to revenue and profit growth.

“We expect revenues and earnings to grow at a CAGR of 20% and 28%, respectively, in FY18-20E. We reiterate our BUY rating on the stock with a revised target price of Rs 950. We believe the recent stock correction offers a good entry point,” the brokerage firm said in a note.

Titan Company hit a 52-week low of Rs 732 on October 9, 2018, corrected 27% from its 52-week high level of Rs 1,006 on April 4, 2018. In comparison, the S&P BSE Sensex was up 3.9% during the same period.

“Titan enjoys a dominant position in the leading lifestyle categories of organized jewelry and watches. Its medium-term growth outlook remains good, supported by various initiatives to drive higher sales of wedding/studded/fashion jewelry, a strengthening value proposition, new customer acquisitions, GHS base expansion and more innovation across watches and new lifestyle segments. Titan also stands to benefit from higher market share as jewelry purchases shift to organized players and the unorganized segment becomes less competitive,” according to analysts at JP Morgan. The brokerage firm maintains ‘buy’ rating on the stock with September 2019 price target of Rs 1,050.