Titan Industries gains after brokerage upgrade

Meanwhile, the S&P BSE Sensex was up 102.81 points, or 0.53%, to 19,427.58.

On BSE, 6.46 lakh shares were traded in the counter as against an average daily volume of 4.22 lakh shares in the past one quarter.

The stock hit a high of Rs 240.35 and a low of Rs 233.30 so far during the day. The stock had hit a record high of Rs 313.60 on 30 November 2012. The stock had hit a 52-week low of Rs 200 on 13 June 2013.

The stock had underperformed the market over the past one month till 8 July 2013, sliding 14.50% compared with the Sensex's 0.54% fall. The scrip had also underperformed the market in past one quarter, falling 7.60% as against Sensex's 4.81% rise.

The large-cap branded gold jewellery retailer has an equity capital of Rs 88.78 crore. Face value per share is Re 1.

The broker said in its report that Titan Industries is sufficiently capitalised to buy gold without too much leverage, while its growth is being supported by additional stores and resilient wedding and discretionary demand. The report added that Titan's policy of hedging gold fully protects it from volatile gold prices, while it offers a strong competitive position due to its high capital efficiency.

Titan imports gold for its retail gold jewellery business. Shares of jewellery retailers are under pressure since last month due to the recent correction in international and domestic gold prices, which was triggered by fears of the US Federal Reserve reducing quantitative easing. Gold demand has also slowed in India following measures taken by the government to curb gold imports.

Last month, the government raised the import duty on gold by 2% to 8%. The Reserve Bank of India (RBI) later clarified that all imports of gold for domestic consumption, either through banks, nominated agencies or directly can be made only with 100% cash margin. The RBI also prohibited credit of any kind from suppliers, or bullion banks for import of gold for domestic use.

The government and the RBI have taken several measures in the past few months to tame gold imports, which is partly blamed for the widening of the India's current account deficit (CAD).

Titan Industries' net profit surged 28.2% to Rs 184.97 crore on 14.8% growth in net sales to Rs 2593.13 crore in Q4 March 2013 over Q4 March 2012.

Titan Industries retails branded gold jewellery under the brand name Tanishq. It sells watches under a premium brand Titan and economy brand Sonata.

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