“Titan’s Q4FY12 Sales, EBITDA and PAT came in at Rs22.8bn (up 28%), Rs2.07bn (up 96%) and Rs1.44bn (up 72%) against our expectations of Rs21.7bn, Rs1.78bn and Rs1.39bn, respectively. Watches volumes were up a robust 14% for Q4 and 15% for FY12, whereas Jewellery volumes declined 7% for Q4 but for the full year it was up 5%. Titan added 41 stores during the quarter, taking the total count to 827 stores with more than 1m sq.ft of operational space. Management in the con-call indicated a pick-up in demand in the last two-three weeks in Jewellery sales though Coins sales remained subdued. Eyewear and Precision Engineering posted 17% sales growth (Eyewear revenue growth of 26% for FY12). Strong volume growth in Watches division remained the key highlight of the quarter.”
“Jewellery EBIT posted 29% YoY growth, while margins remained flat at 10.1%. Studded Jewellery mix improved to 32% for the quarter even though for FY12 it came in at 26%. Titan has started promoting affordable diamond jewellery under the price point of Rs10-25k to attract new customers into the segment. Watches margins improved 40bps QoQ led by price increases. Nonetheless, entire benefit of pricing improvement (13%) did not reflect in margins owing to hedging strategy.”
“We like Titan’s strategy of expanding its presence in Lifestyle segments, essentially categories where demographic dividend can be most leveraged. We reiterate Titan as our top pick in the Retail space and maintain our ‘BUY’ rating, with a one-year forward TP of Rs290 (28x FY14e). Price volatility in Gold can act as a deterrent for volume growth,” says Prabhudas Lilladher research report.
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