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Research
Titan Industries - 4QFY13 Results Update - Motilal Oswal
Posted On : 2013-05-10 20:33:39( TIMEZONE : IST )
4QFY13 results mixed: Titan Industries (TTAN) posted mixed results for 4QFY13. Sales grew 14.8% to INR25.93b (v/s our estimate of INR27.2b). EBITDA grew 34% to INR2.45b, with 140bp margin expansion to 9.5% (v/s our estimate of 9.8%). Higher than expected other income aided PAT growth of 28.2% to INR1.85b (v/s our estimate of INR1.7b).
- Margins boosted by lower ad spends: 16% lower ad spends boosted EBITDA margin. According to the management, lower ad spends is a function of improving scale, better focus on quality and conscious decision to lower spends, given weak consumer sentiment.
- Jewelry - EBIT up 36%: Jewelry sales grew 16% to INR20.93b. EBIT grew 36% to INR2.49b. EBIT margin expanded 180bp to 11.9%, driven by increase in customs duty and lower ad spends. Jewelry volumes grew 9%; LTL sales growth was 8% in Tanishq (10% in 3Q) and flat in GoldPlus (12% in 3Q). TTAN's competitive position has strengthened post gold price correction, as the making charge gap vis-Ã -vis competition has narrowed.
- Watches - disappointing performance: Performance of the Watch division disappointed, with flat sales and 10% volume decline. EBIT margin declined 200bp to 10.9%. World of Titan, Fastrack and Helios posted LTL sales growth of (2%), 15% and 12%, respectively. Management has guided margin expansion ahead, as the adverse impact of excise duty and higher RM costs recedes.
- Management commentary on regulatory issues: Management stated, RBI's policy on imposing restrictions on gold imported on consignment basis will have no impact on jewelers. On regulatory headwinds, the management noted that status quo persists with RBI Working Committee recommendations on lease rate linkage to base rate. As regards PMLA, the government's clarification in parliament has provided relief to the jewelry industry.
- Lowering estimates; maintain Buy: We lower our EPS estimates for FY14/FY15 by 3-3.5%, as we cut our gold price assumption to flat in FY14 and 5% increase in FY15. We now build in higher volume growth of 20% for FY14 and 17% for FY15. Stock trades at 27x FY14E and 21.8x FY15E EPS. Maintain Buy.
