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Titan Industries Ltd (updated - 10 Sept 2009)
With the price of gold moving up steadily — 10 per cent increase in the last couple of months — it’s not surprising that the Titan stock isn’t doing much. Between early July and now, the stock has gained just under 5 per cent. Even though the festive season is round the corner, the jewellery and watch maker may not find too many customers with the price of gold hovering close to the $1,000 per ounce mark.

Since jewellery accounts for nearly 70 per cent of the business, it is a cause for concern. Should prices stabilise at these levels, business should be brisk in the wedding season.

While the last wedding season didn’t fetch Titan too much in terms of sales, the economy is now in a much better shape with consumers more confident about their jobs and income. In the June 2009 quarter, the Bangalore head quartered firm posted a single-digit growth in revenue, even though the period coincided with one of the main wedding seasons.

Of course, gold prices had risen about 20 per cent during the quarter and that hurt jewellery volumes, which came off by 10-12 per cent.
It’s also possible that the retailer lost out to competition, especially store brands. So, although Titan earned better realisations, revenues for the segment were up just 3 per cent. In fact, it was the watch business that did well to post arevenue growth of 21 per cent year-on-year, after a rather lacklustre March 2009 quarter.

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The profitability of the division showed a sharp increase with premium brands doing well. Titan’s strong portfolio of brands across jewellery, watches and eyewear and its strong retail network of more than 500 stores leaves it wellpositioned to cash in on the growing affluence and consumerism in the country. In the current year, revenues are expected to grow around 15 per cent over Rs 3,834 crore last year, while stronger operating margins are expected to drive up profits by about 30 per cent over Rs 175 crore posted last year. However, at Rs 1,279, the stock trades at over 24 times estimated 2009-10 earnings and is rather expensive.
source - BS

Titan Industries Ltd (updated - 30 July 2009)
It’s somewhat surprising that jewellery and watch maker Titan has posted a single-digit revenue growth in the June 2009 quarter to Rs 880 crore, which coincides with one of the wedding seasons in the country. That would suggest that consumer spends remain weak, with the economy yet to recover or that the branded player lost out to the competition. Or a bit of both.

With the price of gold having risen by about 20 per cent during the quarter, the numbers were not expected to be very exciting but the drop in jewellery volumes, estimated to be between 10 and 15 per cent, has been rather disappointing.

The muted volumes resulted in jewellery revenues rising by just over 3 per cent during the quarter, with average realisations estimated to be up around 13 per cent.

The watches’ business has rebounded smartly to post a revenue growth of 21 per cent year-on-year - in the March 2009 quarter, the segment had seen a yearon-year drop in revenues. It’s interesting that the premium Titan brand fared well, though the Sonata brand didn’t do too badly either; the strong sales of high-margin products was reflected in the sharp increase in the earnings before interest and tax (ebit).

Titan continues to roll out stores of Titan Eye+ and Fastrack and its retail presence now extends across more than 500 stores. The company’s reported profit after tax(pat) of Rs 46 crore needs to be adjusted for change in the method of valuing jewellery inventories, which resulted in a one-time gain of Rs 30 crore. Without that, the bottom line was rather weak, falling by about 26 per cent year-onyear. With a strong portfolio of lifestyle brands and backed by an enterprising management, Titan is a good play on growing disposable incomes and aspirations of consumers. However, at the current price of Rs 1255, the stock trades at 24 times estimated 2009-10 earnings and is way too expensive.
source - BS

Titan Industries Ltd (updated - 12 Nov 2009)
With gold prices soaring to nearly Rs 1,700 per gram, sales of jewellery could be somewhat lacklustre during the coming wedding season. As it is, Titan’s September 2009 quarter revenues were up 5 per cent at Rs 1,150 crore resulting in a fall in the operating profit of 14 per cent.

For several quarters now, the jewellery business hasn’t seen any meaningful rise in volumes and according to analysts, volumes have actually fallen in the last three quarters by 8, 15 and 11 per cent.

It’s true that the past year has seen a runaway rise in gold prices at a time when the macroenvironment has been weak. But while consumers may have resumed spending, gold prices remain high.

Jewellery accounts for two-thirds of Titan’s operating profit and with the jewellery business growing faster than the watches business, operating margins for the company, contracted 220 basis points to 8.7 per cent in the September 2009 quarter.

Indeed, the poor performance of the watches division in the September 2009 quarter, where sales dropped 2.6 per cent, came as a bit of a surprise after the excellent show reported in the June quarter when sales were up 21 per cent. Brands such as Sonata are understood to have fared badly. However, the business remains profitable with higher sales of top-end brands and sales should pick up as dealers start restocking.

Titan plans to go slow on its rollout of stores, especially the Gold Plus outlets, in the wake of weaker-than-expected demand. Also, while it had earlier hoped to have around 120-130 Titan Eye stores by March next year, the plans have been scaled back. Nevertheless, its extensive reach and strong portfolio of brands make Titan a good play on growing consumer aspirations and incomes.

In 2010-11, Titan is expected to grow revenues by about 19-20 per cent to Rs 5,300 crore while net profits are estimated to grow 16-18 per cent to Rs 270 crore. However, at the current price of Rs 1,370, the stock trades at a fairly expensive multiple of over 22 times estimated 2010-11 earnings.
source - BS