Several analysts cut their FY2014-15 earnings forecast on Titan Industries, saying lower gold prices would hurt jewellery value growth, while continued weakness in the watches division (volumes down 10 percent in Jan-March) also disappointed.
The watches and jewellery maker on Friday reported a fourth quarter net profit of Rs 185 crore, up 29 percent year-on-year and ahead of street expectation of Rs 175 crore. However, net sales of Rs 2,593 crore, were below analysts forecast of Rs 2,708 crore. Jewellery business margins were boosted by higher sales of studded jewellery.
"Weakness in discretionary segments like watches may continue for a while given the macro environment," feels Kotak Institutional Equities.
The brokerage cut its revenue, EBITDA (earnings before interest, taxes, depreciation and amortization) and EPS (earnings per share) assumptions for FY2014-15 by 9-12 percent, driven by revision in gold price assumptions (impacts gross jewellery sales and margins) and lower revenue growth and EBIT margin assumptions in the watches segment.
Titan is also witnessing various regulatory issues, like increased customs duty to curb gold demand for instance.
Bharat Chhoda and Dhvani Modi of ICICIdirect.com, the retail broking arm of ICICI Securities, have cut their FY14 and FY15 sales forecast by 8 percent and 9 percent respectively. Net profit forecast has been reduced by 5 percent and 6 percent respectively.
"The watches segment continues to remain weak with the rate of growth coming down for four consecutive quarters. We have revised our earnings estimates downwards to capture the weak performance in the watches segment. Considering the regulatory overhang and the pressure on the watch segment (owing to reduced discretionary spends), we are cautiously positive on Titan Industries," they said.
Varun Lohchab and Gaurang Kakkad of Religare Institutional Research also cut their FY14 and FY14 earnings estimates on Titan by around 7 percent respectively.
Manish Jain and Anup Sudhendranath of Nomura Financial Advisory and Securities India also noted "watches segment was a significant disappointment both on revenue growth and margins."
Nomura has a "neutral" rating on the stock. Religare and ICICIdirect maintained their "buy" rating on the stock, while Kotak recommends "add."
Kotak and ICICIdirect, however, reduced their price target on Titan to Rs 295 and Rs 299 respectively, from Rs 325 and Rs 319 earlier.
The stock was trading up 0.7 percent at Rs 272.25 on NSE in afternoon trade.
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