Moneycontrol
Last Updated : Nov 09, 2018 08:26 AM IST | Source: Moneycontrol.com

Titan Q2 preview: Brokerages expect healthy earnings growth driven by watches, jewellery segments

Titan Company's operating income is also expected to grow in double digits, margin expansion is likely to be muted year-on-year though, according to brokerages.

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Watches-to-jewellery maker Titan Company is expected to report healthy earnings growth in quarter-ended September 2018 with profit, topline as well as operating income growing in double digits on a YoY basis.

The stock fell 8.3 percent during the quarter, and 0.6 percent year-to-date.

Overall, brokerage houses expect profit growth to be in the range of 10-26 percent compared to year ago period and revenue to rise 10-23 percent driven by watches as well as jewellery segments.

"We expect Titan's revenue to increase 20 percent and adjusted profit after tax is expected to grow 21.4 percent," Motilal Oswal said.

ICICI Direct Research said overall revenues are expected to increase 20 percent and profit 18 percent, YoY.

It expects Titan's jewellery division to report 20 percent revenue growth YoY driven by a favourable base in July (as per the management, the company reported 41 percent revenue growth) and reasonably good August due to activation of studded jewellery. "Watches division is expected to report revenue growth of 10 percent, YoY."

While estimating 19 percent growth in profit and 26 percent in topline, Kotak Securities said, "We model (1) 30 percent YoY growth in jewellery segment revenues off a high 36 percent growth in the base quarter, (2) 7 percent like-for-like growth in the watches segment revenues driven by share gains and (3) modest revival in growth in other smaller business segments, including eyewear (+14 percent YoY).

While operating income is expected to grow in double digits, margin expansion is likely to be muted year-on-year, according to brokerages.

Brokerages see 15-21 percent growth in EBITDA (earnings before interest, tax, depreciation and amortisation) for the quarter ended September 2018.

ICICI Direct Research, Motilal Oswal, Kotak Securities and Emkay Research expect EBITDA growth of around 20 percent, while Prabhudas Lilladher sees  it at 15 percent, YoY.

"Titan had reported one of its highest ever EBITDA margins. Hence, we expect limited scope of margin expansion in Q2FY19. EBITDA margins are expected to remain flattish at 11.4 percent YoY," ICICI Direct Research said.

Motilal Oswal said gross margin is expected to expand 150 bps YoY to 28.1 percent, but underlying margin expansion may be flat YoY at 12.1 percent.

Emkay Research also feels margins are likely to be flat given the high comparables, including one-off gains.

Key issues to watch out for

> Pace of shift from unorganised to organised trade

> Proportion of jewellery sales being driven by SSSG

> Watch out for profitability in watches and Tanishq store openings.
First Published on Nov 9, 2018 08:26 am
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