Krishna KarwaMoneycontrol Research
Titan’s robust top-line year-on-year (YoY) growth in the December quarter was led by the jewellery segment. The onset of the wedding and festive season, new product launches and 27 new store additions under the ‘Tanishq’ brand in 9M FY19, have kept its sales going strong.
The company’s watches and eyewear segments didn’t disappoint either. Revenues in these categories grew sharply on account of the availability of new product variants, higher traction across retail formats and larger volumes.
The company's lifestyle products such as SKINN perfumes and Taneira sarees, have also seen a good response.
A healthy same-store sales growth and market share gains helped derive operating leverage in the jewellery segment. High advertisement spends impacted the profitability of Titan's watches segment, whereas its eyewear segment failed to break even.
Lower gross margins and a steep increase in other expenses resulted in EBITDA margins remaining flat YoY.
Depreciation and interest costs increased YoY by 10.2 and 43.5 percent respectively. There was an increase in tax rate from 29.2 percent (in Q3 FY18) to 31.4 percent too. Notwithstanding this, a major spike in other income prevented its bottom-line margins from declining.
At 47 times its FY20 estimated earnings, the stock already trades at demanding valuations. We advise buying on corrections.
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(Disclaimer: Moneycontrol Research analysts do not hold positions in the companies discussed here)
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