Apr 17, 2013, 12.34 PM IST | Source: CNBC-TV18

Titan's Q4 jewellery sales growth seen at 17%: StanChart

Deep correction in gold price has spurred branded jewellery demand which has benefited Titan Industries in the short run, Sanjay Singh, Associate Director, Standard Chartered Securities said in an interview to CNBC-TV18.

Sanjay Singh

Director, Standard Chartered Securities

Expertise : Equity - Fundamental

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Deep correction in gold price has spurred branded jewellery demand which has benefited Titan Industries in the short run, Sanjay Singh, Associate Director, Standard Chartered Securities said in an interview to CNBC-TV18.

One can expect a robust March quarter for Titan's jewellery segment. "Titan Industries could see a positive surprise in March quarter. In the March quarter, we are expecting a 17 percent topline growth for Titan’s jewellery, which is quite good in the environment we are in," he added.

The key factor driving demand would be how macros pan out than gold price. "If economy ramps up, volume will compensate for the gold price to an extent because consumption buying does not happen on gold volumes, it happens on budget. But if it keeps falling, it is not possible that it will not impact sales growth because there will be postponement of demand," he explained.

Also read: Fall in gold price psychological phenomenon: Wilbur Ross

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Before we talk about the large consumers, have you changed your estimates on Titan Industries on account of what has been going on in the gold market?

A: As of now we have reduced our estimates somewhat around 5 percent mainly on the back of a weak macro. Given the economy where it is, discretionary purchases will get postponed.

Gold, given the scenario it is in, has been in the short run beneficial for Titan Industries. So to say because given that gold was in a secular run, short dip in the last three-four months and of course big dip a few days back has spurred the demand to an extent. At least in the branded jewellery space because people were on the sidelines for a long time probably.

So, for Titan Industries, this quarter should be quite good. We are expecting a pretty robust quarter, which is March quarter. Going forward, if gold remains weak, of course demand will get postponed. There maybe a short-term impact. We are talking about March quarter and that should be pretty okay as we speak.

Titan Industries is one of the stocks where we feel March quarter could be a positive surprise. Going forward, we need to see how gold settles down. More importantly how economy behaves because that will spur the disposable income led spending.

Q: Some of your peers though are suggesting that Titan Industries maybe up for a rougher couple of quarters. What anecdotally have you seen in terms of a jump that you expect to see in sales because of gold falling?

A: We are talking about the March quarter and we are expecting a 17 percent topline growth for Titan jewellery. This is quite good in the environment we are in.

Going forward, if gold remains at these levels or goes down further, there will be a postponement of demand given the space addition it could impact margins here and there. However, it is very difficult to take a call on gold at this point of time. Saying, whether it will go to 30 percent lower from here or 30 percent higher from here. So, I am okay with gold at these levels as I do not think it will hit demand very significantly.

The key variable is not gold prices but the economy. If economy is ramping up and moves in the right direction, the volume will compensate for the gold price to an extent. Consumption buying does not happen on gold volumes of gram mage. It happens on budget.

Wedding don’t happen on how many grams you want to give, but happens on the budget. So, in some way, the volume will compensate for the gold price. However, yes, if it keeps falling, it is not possible that it will not impact or apply sales growth because there will be postponement of demand.

However, I am more worried on the economy than on the gold prices.

Q: What are you expecting from Hindustan Unilever Ltd ( HUL ) in the current quarter? There seems to be a fear that we may end up with fairly tepid volume growth maybe even lower than what we saw last quarter?

A: Both HUL and just to give a sense of the consumer staple names it has been on a downhill for the last three quarters. So, June was bad, September was worse than June and December was very bad compared to September.

March quarter we will see a similar trend to December quarter. So, the tepid volumes will continue to a large extent but yes, it will not deteriorate further.

Coming back to HUL, we expect around 4 percent volume growth, which is a little lower than 5 percent last quarter. However, it is not very significantly lower. So, a 4 percent volume growth might disappoint the street. However, it is in trend with the last quarter.

Even for other consumer staples, we expect the volume growth to be similar to Q3 and the trend is not deteriorating as of now. We need to see how things go forward with a monsoon in the quarters coming in, but as of now the trend and volume growth is moderate. However, it is not going down further.

The story is a little different than discretionary, where after a good festive quarter we should see a lot of softness this quarter. So, things like Asian Paints, Jubilant Foodworks even Titan Industries would have been bad. However, the gold price has attracted consumers for a quarter. So, next quarter could be different. Discretionary has become very bad after a good last quarter, but staples is holing on similar to what it did last quarter.

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