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Titan disappoints on volumes, margins

Titan disappoints on volumes, margins
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First Published: Tue, Oct 25 2011. 10 14 PM IST

Updated: Tue, Oct 25 2011. 10 14 PM IST
Titan Industries Ltd’s share price fell by 4.5% on Tuesday, a day the BSE-100 index rose by 1.5%, after the firm reported weaker-than-expected results for the quarter ended September. Revenue growth looked robust at 36%, but that was mainly because of a surge in gold prices. Volume growth in the jewellery segment, which accounted for 77% of the total revenue, was disappointing at 3%. The sharp rise in gold prices evidently hurt demand.
Much of Titan’s remaining 23% revenue comes from the the watches business, which was hit by an increase in input costs and adverse currency fluctuations. While revenue from the watches business increased by 16%, earnings before interest and tax (Ebit) fell 13% and the Ebit margin slipped by 544 basis points to 16.1%. The good news from this segment was that volume growth stood at 19%. Besides, as analysts at Kotak Institutional Equities said in their post-results update, “The company has taken a price increase of around 7% in watches in October, which will likely help it recover the cost inflation entirely.”
On an overall basis, operating profit margin fell by 175 basis points to 9.5% and operating profit increased by 15.4%. Recurring net profit growth was slightly higher at about 20% to Rs 152.9 crore, mainly helped by higher other income.
Since the beginning of this fiscal, the Titan stock has outperformed the BSE-100 index. Investors will now keenly watch out for the performance in the December quarter, as the festival season falls in this period. Fortunately, gold prices have stabilized. But they are still considerably higher year-on-year, so it remains to be seen whether volumes will improve materially compared with the September quarter.
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First Published: Tue, Oct 25 2011. 10 14 PM IST