Jewellery continues to glitter for Titan

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Jewellery business revenue and Ebit growth stand at 27% and 29%, respectively

Pallavi Pengonda

First Published: Wed, Jan 30 2013. 07 37 PM IST

Titan Industries has seen a consistent improvement in the jewellery business volumes for the last three quarters. Photo: Priyanka Parashar/Mint

Updated: Thu, Jan 31 2013. 01 19 AM IST

“The signs are right,” Titan Industries Ltd management had said during the September quarter conference call. Another quarter down the line, the company’s performance reflects that optimism. Sure, the Ebit margin has narrowed to 9.8% in the December quarter from 12.5% in the September quarter. Ebit is short for earnings before interest and tax. But then, the September quarter margin for the jewellery business was anyway the highest in atleast the past six quarters at that time.

Moreover, the nature of the business in which Titan operates does have an element of seasonality so a sequential comparison may not be appropriate. Sure, the December quarter performance got a lift because of the festival season. But on a year-on-year basis, the jewellery business Ebit margin has improved by 20 basis points. One basis point is one-hundredth of a percentage point.

However, that’s really not the highlight for last quarter. What stands out is that jewellery business volumes have increased by 12% this time around. Compare that to the 11% and 21% decline seen in the September quarter and June quarter, respectively.

The company has seen a consistent improvement in the jewellery business volumes for the last three quarters. The jewellery business revenue and Ebit growth, too, was strong at 27% and about 29%, respectively. Titan derives a massive chunk of its total revenue from its jewellery business (around four-fifths usually).

Titan’s second major business is the watch business, which has disappointed to some extent. Ebit margin narrowed in the watch business by 46 basis points compared with the same period last year to 12.01%. The company blames the excise duty hike and higher material costs for the margin decline. Still, the watch business revenue increased by 11%, thanks to the price increases the company has announced over the last one year.

On an overall basis, Titan’s total operating revenue and net profit increased by around 24%, looking far better than the 9% revenue growth and 21% net profit growth in the September quarter. Little wonder, the stock rose by 2% in reaction to the numbers. At Rs.275, the stock trades at 27 times its estimated earnings for the next fiscal year. While valuations appear to be on the higher side at these levels, if consumers persist with their love for the yellow metal, there could be some more room for the valuations to improve.