Titan Co slips over 1% ahead of Q2 earnings; here's what to expect

Shares of Titan Company slipped over 1 per cent to Rs 1,216.75 apiece on the BSE on Wednesday ahead of its September quarter result (Q2FY21) due later in the day. In a quarterly update earlier this month, the company highlighted that Q2 was on a par with the year-ago period, led by improving walk-ins.

The company said its jewellery business did very well during the quarter, with a recovery rate of around 98 per cent (excluding sale of raw gold), compared to the revenue of the corresponding quarter in the last year.

In a separate development, the company recently announced that in a bid to focus on its core businesses, it will end its five-year-old joint venture with luxury goods maker Montblanc. READ MORE

Analysts at Edelweiss Securities expect Titan's revenue for the September quarter to dip nearly 20 per cent year-on-year (YoY) to Rs 3,559.3 crore, primarily on account of weaker demand for watches (78 per cent YoY decline) and eyewear (62 per cent YoY decline). Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is estimated to fall 91 per cent YoY to Rs 46.3 crore while it is expected to post a loss of Rs 48.9 crore against a profit of Rs 320.2 crore in the year-ago period.

ICICI Securities notes that September is expected to be soft owing to inauspicious days in the month. "The overall demand is mainly driven by plain gold jewellery and gold coins. The share of studded ratio continues to be lower. The company also sold gold bullion worth Rs 390 crore in the quarter to manage cash flows," the brokerage said in a result preview note.

It expects revenue from the jewellery division to increase by 9 per cent YoY in Q2FY21. Watches segment was the worst impacted category with a recovery rate of only 40 per cent in July. However, the recovery has been on an upward trajectory with the division witnessing a 70 per cent recovery rate in September. Hence, it expects the watch division to report a revenue decline of 45 per cent YoY.

Overall revenues are expected to decline 3 per cent YoY to Rs 4517.6 crore. Owing to a change in product mix (lower share of studded ratio) the brokerage expects gross margins to decline 210 bps YoY to 27.8 per cent. Cost-saving initiatives are expected to restrict EBITDA de-growth. EBITDA margin is seen declining by 220 bps YoY to 9.0 per cent while the company is expected to report PAT of Rs 219.2 crore (vs. loss of Rs 294 crore in Q1FY21).