Titan Q2 EBITDA margin seen up 40 bps to 10%

Titan Industries , the fifth largest integrated watch manufacturer in the world, is set to announce its July-September quarter earnings today. Analysts on an average expect the profit after tax to grow by 17 percent year-on-year to Rs 173 crore during the quarter.

Total income is seen going up by 16 percent to Rs 2,425 crore during the same period.

Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to rise by 19 percent YoY to Rs 239 crore while EBITDA margin is likely to go up by 40 basis points to 10 percent in the quarter ended September 2012 versus 9.6 percent in a year ago period.

Expectations

Analysts feel the quarter is likely to be a muted one due to overall slowdown in consumer discretionary spending.

According to analysts, late onset of Diwali in third quarter of FY13 will also affect volume growth.

High gold prices will continue to impact volume growth negatively. Gold prices are still up 21 percent on a YoY basis, and expect this to prop up revenue growth.

Watches business volumes are likely to be under pressure, given strong price hikes by 5-7 percent in July/August, which will likely compensate for the cost increases in absolute terms.

Depreciation in Indian rupee will hurt margins as watch and accessories segments have high dependence on imports, say analysts.

In previous quarter, Titan increased its EBITDA margin by just 10 basis points YoY to 9.6 percent but that was ahead of expectations of 9.3 percent.

Its watches segment grew 14.4 percent YoY to Rs 360.7 crore while jewellery business rose by 7.8 percent YoY at Rs 1,775 crore in the first quarter of FY13.

Profit after tax in June quarter went up by 8.8 percent YoY to Rs 156.1 crore, which was lower than analysts' forecast of Rs 166.4 crore due to higher interest cost.

Analysts feel the high inflation, weak rupee and a poor monsoon are likely to have a poor impact on the growth and profitability of the company.

The stock fell 3.41 percent yesterday to close at Rs 257.80 while it gained 56 percent in 2012.