Photo: Mint
Photo: Mint

Titan Q4 glitters less, but no worries on consumption slowdown ahead

  • Adjusting for the certain one-off items, the numbers are more or less in line with expectations
  • Pre-tax profits for Q4 were impacted by additional provisions for investments in IL&FS ( 46 crore), temporary inventory valuation hit in the jewellery business ( 37 crore) and ex-gratia for staff ( 34 crore)

Titan Co. Ltd’s shares closed marginally higher in a weak market on Wednesday, just ahead of the announcement of its March quarter results.

However, if investors were hoping for great results, they will be disappointed. The jewellery retailer’s last quarter results were not earth shattering. Revenue increased by 19.3% year-on-year to 4,672 crore, but adjusted profits were flat at year-ago levels, according to analysts at Edelweiss Securities Ltd.

However, management commentary on the future outlook was relatively positive compared to some other consumer goods firms. Titan hopes to benefit from higher number of wedding days in FY20, it said during an earnings conference call. Additionally, the company has benefitted from market share gains from the unorganized segment.

These factors, say analysts, will help support the company’s expensive valuations from a near-term perspective. The Titan stock trades at about 50 times estimated earnings for FY20.

“We continue to remain positive on Titan due to its ability to keep getting market share in jewellery, strong guidance of 20% growth (an outlier in 2019-20 across the consumption theme)," said Abneesh Roy, senior vice-president at Edelweiss Securities. The company is also preparing for the future with drivers such as saris, smart wearables and rapid retail expansion, he added.

(Naveen Kumar Saini/Mint)


Coming back to the March quarter earnings, Titan’s results were adversely affected owing to certain one-off items. Adjusting for that, the numbers are more or less in line with expectations, say analysts.

The company’s pre-tax profits for the March quarter were impacted by additional provisions for investments in Infrastructure Leasing and Financial Services Ltd ( 46 crore), temporary inventory valuation hit in the jewellery business ( 37 crore) and ex-gratia for staff ( 34 crore).

Titan’s jewellery revenue, which accounted for 84% of its total revenue, increased by 21% year-on-year, a shade better than expected. The inventory valuation knock seen in the March quarter is likely to be reversed in the next quarter, it said. Titan derived about 11% of its revenue from the watch business, which delivered muted performance.

According to the company, Ebit (earnings before interest and tax) margin was at 5.5%, impacted by lower gross margin due to product and channel mix, and ex-gratia provisions made in Q4 for employees.

Investors have continued to make good returns on the Titan investment, which is now the second-most valuable firm in the Tata group, ahead of Tata Motors Ltd and Tata Steel Ltd. So far this calendar year, Titan shares have risen nearly 17%, whereas the Nifty 100 index has gained 3.2%. However, expensive valuations indicate that investors are baking in a good portion of the optimism into the price.

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