Titan Company - Q4Y20 First Cut - ICICI Securities

(CMP: Rs. 1019, MCap: Rs. 90509 crore)

Titan reported Q4FY20 results, wherein numbers were above our estimates across all parameters. While revenues were impacted owing to temporary store closures from mid-march onwards, significantly higher profitability was a positive surprise. Overall topline de-grew 4% YoY to Rs. 4711.5 crore (I-direct estimate: Rs. 4470.3 crore). Despite weak topline growth, EBITDA margins improved significantly by 260 bps YoY to 11.7% (I-direct estimate: 8.7%). PBT grew by 13% YoY to Rs. 509.3 crore, however owing to higher tax rate (33% vs. 23% in Q4FY19) PAT remained constant YoY at Rs. 343.2 crore (I-direct estimate: Rs. 269 crore). The base quarter (Q4FY19) had an exceptional expense worth Rs. 46.0 crore pertaining to IL&FS provision.

During the year, the company transitioned to IND-As 116, which led accounting to shift from operating lease model (off-balance sheet) to finance lease model (on balance sheet). Rental expense is now charged under depreciation and interest under IND-AS 116. The net effect has resulted in profit before tax being lower by Rs. 6.6 crore in Q4FY20.

Q4FY20 Earning Summary

- As guided by the management in its pre-quarterly update, the jewellery division reported revenue de-growth of 5% YoY to Rs. 3899.3 crore. Company had recorded an impressive growth of 16.5% in Jan-Feb despite high gold prices. Diamond studded activation in January and healthy demand for wedding jewellery (~25% of revenues) aided performance of the division in Q4FY20. Despite the watches segment being the most impacted category in March, the division reported impressive revenue growth of 5% YoY to Rs. 558.3 crore. Online channels and modern retail stores continued to outperform traditional channels of sales in Q4FY20. Revenue for the eyewear division declined by 16% YoY to Rs. 107.7 crore. Overall consolidated revenues (including other operating income) de-grew 4% YoY to Rs. 4711.5 crore (I-direct estimate: Rs. 4470.3 crore)

- Owing to activation of diamond studded jewellery, gross margins for the quarter improved sharply by 250 bps YoY to 30.4% (I-direct estimate: 28.4%). Furthermore significant compression of operating cost aided profitability. Employee expenses remained constant YoY at Rs. 285.0 crore (down 13% sequentially), while advertisement expenses declined 30% YoY to Rs. 97.1 crore. EBITDA margins (adjusting for IND-AS 116) for the quarter improved by 260 bps YoY to 11.7% (I-direct estimate: 8.7%). The base quarter had an exceptional expense worth Rs. 46.0 crore. Even after adjusting for the same, EBITDA margins showed an improvement of 160 bps YoY

- On account of steady operational performance, PBT grew by 13% YoY to Rs. 509.3 crore. However, owing to higher tax rate (33% vs. 23% in Q4FY19) PAT declined marginally by 1.5% YoY to Rs. 343.2 crore (I-direct estimate: Rs. 269 crore). Company has reopened 43% of stores across all divisions and the initial response from the customers has been encouraging.

We would soon be coming out with a detailed report.

Shares of Titan Company Limited was last trading in BSE at Rs.1019.5 as compared to the previous close of Rs. 991.05. The total number of shares traded during the day was 297462 in over 10475 trades.

The stock hit an intraday high of Rs. 1065 and intraday low of 997.05. The net turnover during the day was Rs. 306051800.

Source : Equity Bulls

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