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 year-on-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-on-year.
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.
