Titan – Q2 FY20 (Unaudited – Cons.)
Share price – 1283
Total revenue from operations at 4,693 Cr
4,595 Cr (0.22%) YoY | 5,208 Cr (-9.89%) QoQ
Half year revenue: 9,902 Cr Vs. 9,082 Cr (9.02%)
Net Profit of 311.6 Cr
301.1 Cr (3.33%) YoY 363.7 (-14.37%) QoQ
Half year ending Net Profit: 675.3 Cr Vs. 629.2 Cr (7.31%)
EPS (in Rs.) 3.41
3.45 YoY | 4.12 QoQ
Half Year ending EPS: 7.53 Vs. 7.18
View: Average result and below expectation. However YoY revenue up and profit also up in YoY due to Corporate Tax reduction impact. QoQ revenue and profit both have declined.
Business Highlights & Updates:
Company is diversified group and in various sector including Watches – 15% Jewellery – 77.5%, Eyewear – 3% and others – 5%. YoY topline growth for Watches – 6%, Jewellery – Flat, Eye wear – 28% and others – 12%. YoY bottom line growth for Watches – (7%), Jewellery – 0.2% (muted growth), Eye wear – 298% (Immaterial nominal amount around INR 2 Cr only) and others – 57% (still bearing loss).
Revenue for the company grew by only 0.6% in the quarter impacted substantially by the decline in the revenues of the jewellery division due to the sudden spike in gold prices in June2019. Jewellery revenue declined by 1.5% in Q2.
Flat top line and higher costs affect PBT growth and margin which, at 9.7%, was lower by 40bps YoY. Employee costs were much higher due to effect of wage settlement and higher provisions for leave pay arising out of lower interest rates.
The company added 73 stores with a retail space of 103k square feet in YTD’20,on net basis.
EBIT margin of Q2’20 was at10.9%, same as in Q2’19.
Watches: The division witnessed moderation in growth due to weak consumer sentiments leading to revenue growth of 6.4% for the quarter and 12.9% for first half.
The company increased its stake from 69.5% to 72.3%.in CaratLane by purchasing 9,45,000 equity shares from one of the shareholders of CaratLane. Caratlane recorded revenue growth of 76% in Q2’20, driven by strong growth in both offline and online channels. Caratlane added 16 stores to its network, in YTD’20, taking the total store count to 71.
YoY EBITDA margin is around up by 10.1% in Q2FY20.
The company’s employee benefits expense rose nearly 30 percent over the last year to Rs 265.7 crore during the second quarter. Its finance costs jumped fourfold to Rs 40.8 crore.
ROE and ROCE is around 22% and 27% respectively and book value per share is around INR 70 and share is currently trading at 19 times of its book value. Company is currently trading at annualized PE of around 85 which is very expensive as per Industry benchmark. Promoter holding in the company is around 52.9%, mutual fund, FIIs and insurance cos hold around 5%, 18.7% and 3.1% in the company. Finance cost is also significantly increased in this quarter as compare to YoY INR 44.8 Cr Vs. 13.4 Cr and 33.8 in QoQ and loan amount also increased by more than 1K Cr in this H1FY20. The good thing is company has very good liquidity position in the system and Operating profit margin is also stable.
Share price high 1389 and now 1283. Titan Company Limited is an Indian consumer goods company. It is a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation. The brand Tanishq is highly reputed and very famous brand in the Metro and Tier II cities and which also covers Titan more than 78% of the business. Q3 is also very important for Titan since festival season sale completed in Q3FY19 growth was 34%. Based on the high gold price its doubt for company to achieve or sustain this growth for Q3FY20. And higher prices and a weak economy, according to the World Gold Council, are expected to drag demand for gold in India this year to its lowest since 2016.
Long term Investors can still continue with the company. Short term its not advisable to enter at this price. Wait for Q3.