Titan Industries Ltd, Financials-Q2FY'13 Result Analysis: Key Takeaways
Titan Industries Ltd has reported a revenue turnover of 22,759 mn and a net profit of 1,802 mn the quarter ended Sep'12. With increased gold prices reducing grammage volumes, the company’s focus on the diamond studded jewellery segment and changes in macro drivers (increase in income and spend disposition) induced strength in jewellery demand. Q2FY’13 profit rose ~21% YoY to 1,802 mn, in-line with street expectations, however, lower than our estimates of 2,046 mn.

Net revenue has witnessed ~9% YoY growth (~13% QoQ) to 22,759 mn for the quarter ended September 2012. Revenues from Jewellery business witnessed ~6% growth to 17,239 mn contributing ~75% to total sales. The watches business grew by ~13% to 4,717 mn while other business (including corporate) witnessed ~53% growth to 1,040 mn OPM has inclined by 99bps to ~11%. The net profit after tax was up by ~21% to 1,802 mn. At the operating levels, margins from Jewellery was up by 274 bps to ~12.52% was one of the highest, as a result PBIT was up by 35% to 2,150 mn. Watches business margins decreased by 452 bps to ~11.6% resulting ~19% decline in PBIT to 546 mn. Others business (including corporate) reported loss at PBIT level of 43 mn. The watches and eyewear business with decent import content continued to be affected by input cost increase and adverse currency movements, thus impacting the margins. As we go forward, the company sees to simulated growth through investment in advertising, The expectation, therefore for the festive season is positive even though sales may come at a cost. We expect the company to introduce several new products and opening many stores early in third quarter.

Improvement in consumer sentiment, demand of festive season (including forthcoming wedding season) improving base comparison and aggressive retail expansion plan is likely to auger well. However, we remain wary of any spur that could hurt the jewellery business. We re-iterate HOLD, however, revalue to 315 (7.5% return). The stock trades at a P/E of ~36.6x and P/BV of ~13.3x of FY’13E EPS & BVPS. Our TP is arrived using a P/E of ~39.3x and P/BV of ~14.3x of FY’13E EPS and BVPS of 8 and 22 respectively.