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Feb 01, 2012, 03.13 PM IST | Source: Moneycontrol.com

How do analysts view Titan's Q3 results?

Titan Industries shares slipped over 4% on Wednesday after the watch and jewellery maker reported little lower-than-expected 19% year-on-year rise in third quarter net profit and margins also disappointed investors.

How do analysts view Titan's Q3 results?
Moneycontrol Bureau

Titan Industries shares slipped over 4% on Wednesday after the watch and jewellery maker reported little lower-than-expected 19% year-on-year rise in third quarter net profit and margins also disappointed investors.

The company's net profit was at Rs 163.91 crore in October-December, compared with 137.6 crore in the year ago quarter. Revenue was up 25.6% year-on-year at Rs 2,471.5 crore.

Analysts on average had expected Titan to report a third quarter net profit of Rs 168 crore on sales of Rs 2,500 crore, according to a CNBC-TV18 poll.

"Management mentioned gold jewellery offtake (74% of segment sales, including coins/bars) remains under pressure. It is betting on diamond sales – discounts and promotions continue through Jan-Feb, which we believe may support volumes, but impact margins," said Aditya Mathur and Jamshed Dadabhoy of Citigroup Global Markets.

Jewellery EBIT (earnings before interest, taxes) margins fell 50 basis points year-on-year at 9%, while EBIT margins in watches at 12.5% were 400 bps below forecasts, the two analysts noted.

Here's a look at how analysts view Titan's Q3 performance and the outlook going ahead:

Citigroup: Third quarter results as well as commentary on the demand outlook seem unexciting. While it remains a good long-term story, we believe the risk reward balance at this juncture is unfavourable – near term margin pressures, elevated expectations, volatile gold prices and valuations at 25 times fiscal 2013 P/E will limit stock performance. Rating: Sell. Target: Rs 190.

Edelweiss: Price hike initiated in watches segment to offset raw material pressure in Q3 will reflect in fourth quarter improving profitability of the segment. Performance of precision engineering division segment which turned profitable this quarter was a major highlight. Rating: Buy.

Emkay Global: Titan has multiple challenges, sagging volume growth in jewellery, lower margins in watches and jewellery business…Retain negative bias. Rating: Hold. Target: Rs 197.

Kotak Institutional Equities:  We are believers in the long-term opportunity for Titan, likely higher discretionary spends, penetration and consumption-led growth, mix improvement in favor of diamond and studded jewelry is a positive as it enjoys higher margins and reduces the vulnerability of the company to volatility in gold prices.  Rating: Add. Target: Rs 210.

MF Global: The rate of growth for Titan was impacted by the slowdown in discretionary consumer spending and same was evident from the volume de-growth, despite space addition, in the jewelry segment. The company indicated that revenue generation is coming at a cost like promotions, discounts etc.

Titan shares were down 4.1% at 194.70 on NSE in afternoon trade on Wednesday.

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