stocks highlights watch and other industry watches companies Titan Industries

Segment-wise, Ebit margins rose 720 bps for watches to nearly 14.7 per cent, while jewellery margins expanded 62 bps to over 7 per cent. However, Titan’s other businesses continued to struggle, posting a 7 per cent decline in revenues and a 12 per cent dip in profits, because of deferred and cancelled orders in its precision engineering division.

Titan is putting greater thrust on diamond jewellery and expects its share to move up from the current 25-30 per cent to 40 per cent in the next five years. It is increasing the number of stores and experimenting with larger retail formats. Analysts expect that volumeled sales growth impetus will continue at the current pace, with some margin expansion coming from the thrust on diamond jewellery.

The watches segment is expected to grow at a slower pace, while margin improvements will drive the bottom line, say analysts, as the company is expected to shift focus and manufacturing to premium brands.

The stock has seen universal earnings per share (EPS) upgrades by analysts and closed at Rs 1,732 on Wednesday, 3.6 per cent higher than the previous close at about 26.6x consensus analyst FY11 EPS estimates.
source - BS

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The company generally uses gold on lease facility and pays rent on the yellow metal till it is consumed, point analysts. It closes gold contracts at the time of product sale, and not at the time of purchase, say analysts at Prabhudas Lilladhar. According to the management, this strategy ensures 90-95 per cent hedging and the company does not need to carry any naked inventory on its balance sheet, thus, preventing it from any mark-tomarket losses or gains.

Before April 2008, Titan used to apply fixed making charges on per gram basis, thus, exposing itself to margin volatility in an environment of rising gold prices. From April 2008, Titan has linked making charges to gold prices, charging anything between 16 per cent and 20 per cent of the gold price, thereby ensuring stable margins.

The watch segment, which contributes 22 per cent to its revenues and 46 per cent to earnings before interest and tax, has also been seeing better volumes. The market leader in the branded space is expected to see steady realisations at Rs 950 to Rs 1,000 and better margins as the premium segment expands. Importantly, the company enjoys a 51 per cent premium over the Sensex, courtesy its brand presence.

Titan Industries: Regaining the lustre (updated - 13 July 2010)
The watch and jewellery leader in the organised segment, Titan Industries, is likely to see robust sales growth on the back of rising income levels and stable gold prices. Volumes in watches and jewellery segments grew 12 per cent and 50 per cent, respectively, in FY08. They later slipped to anegative five per cent for watches and 18 per cent for jewellery in FY09, but recovered in FY10. However, as gold prices stabilise, volumes in the jewellery segment are expected to bounce back.

Overall, revenues and earnings have managed to rise at a compounded annual growth rate of 33 per cent and 66 per cent, respectively, since FY05. But, higher gold prices had taken a toll on the jewellery business. Before 2008, the company not only faced lower volumes due to high prices, but also faced other risks, especially inventory gains and losses.

This premium is expected to persist, as its returns-on-capital employed remains high at around 40 per cent. Also, it has steadily generated enough cash from the business to become azero-debt company.
source - business standard

Titan Industries Ltd (updated - 04 Feb 2010)
The return of the consumer in the December quarter helped Titan Industries post its first double-digit growth in a year, with demand returning to both key segments - jewellery and watches. A relatively longer wedding season and lower gold prices (as compared to the previous year) boosted jewellery sales nearly 34 per cent. Revenue from watches rose 25 per cent from the year-ago period, the sharpest growth in over ten quarters, due to a turnaround in large retail formats and individual distributor demand.

Titan saw sales grow nearly 30 per cent to Rs 1,334 crore. Lower finished goods costs and employee expenses helped expand earnings before interest, tax, depreciation and amortisation (Ebitda) margins to 8.27 per cent, a 236 basis points (bps) expansion compared to the corresponding quarter last year. Ebitda increased 82 per cent to Rs 110 crore. Profit after tax tripled to Rs 75.4 crore.