Titan - Result Anallysis Q1 FY21

Titan - Result Anallysis Q1 FY21

CMP: 1,068 (As On 11-08-2020)

Total income from operations 2,020 Crs 

5,205 Cr (-61.11%) YoY | 4,753 Cr (57.58%) QoQ 

Year ending revenue: 21,205 Cr Vs. 19,779 Cr (7.21%)

Net Profit of (297) Cr 

364 Cr (181.59%) YoY 343 Cr (186.53%) QoQ 

Year ending Net profit: 1,493 Cr Vs. 1,404 Cr (6.34%)

EPS (in Rs.) (3.28)

4.12 YoY | 3.93 QoQ 

Year ending EPS: 16.91 Vs. 15.82

View: Result is below expectation and declined. YoY and QoQ revenue declined and company also posted losses in this quarter due to complete lockdown of their stores in April and partially resumed the operations in May and June 2020. 

Business Updates & Highlights:

Company is primarily operating into three main segment which are as under:

Jewellery

Revenue for the division declined by 71% (excluding bullion sales). Revenue growth in May & June month was at about 20% and 72% compared to the same months of previous year. INR 1,182 Cr VS. 1,147 in corresponding previous quarter

EBIT in Q1FY21 was around INR (54) Cr Vs. 442 Cr in Q1FY20.

Lockdown led to zero sales in the month of April, a month which should have seen very high sales normally due to ‘Akshaya Tritiya’ festival. The recovery has been better than originally envisaged on the back of higher share of wedding jewellery sales (despite the deferment of many weddings), good sales coming from GHS scheme, and investment led demand leading to higher gold coin sales.

Gross margins in the business have suffered as studded ratio was lower at 18% compared to 25% in the previous year.

Watches & Wearables

Revenue was consequently down by 90%. Revenue growth of May & June month was at about 5% and 23% respectively. 75 Cr vs. 715 Cr in corresponding previous quarter.

EBIT in Q1FY21 was around INR (164) Cr Vs. 128 Cr in Q1FY20.

Eye Wear

The Eyewear category, that requires extended store level interaction with customer also was impacted severely. Revenue was down by 80%. Revenue growth of May & June month was at about 15% and 35% respectively. 30 Cr Vs. 149 Cr in corresponding previous quarter.

EBIT in Q1FY21 was around INR (31) Cr Vs. 11 Cr in Q1FY20.

The division closed 15 stores during the quarter, on net basis, ending up with a reduction of about 8K sq. feet of retail space.

Other business - Fragrances, Indian dress wear and Accessories

Other business declined by 88%.It has been a slow recovery particularly for the ‘Indian dress wear’ business with the recovery rate being around 40% in June.

Subsidiary / JV businesses

Caratlane Total income in Q1FY21 was around INR 44 Cr Vs. 133 Cr in Q1FY20 therefore declined by 67% in YoY. Profit in Q1FY21 was around INR (14) Cr Vs. (5) Cr in Q1FY20.

Teal Total income in Q1FY21 was around INR 77 Cr Vs. 95 Cr in Q1FY20 therefore declined by 19% in YoY. Profit in Q1FY21 was around INR 7 Cr Vs. 15 Cr in Q1FY20.

Financial

ROE and ROCE is around 24% and 24% respectively and book value per share is around INR 75 and share is currently trading at 14.8x of its book value. Company is currently trading at annualized PE of around 93 which is very high as per Industry benchmark. Promoter holding in the company is around 52.9% which is good and stable. FIIs, mutual fund and insurance cos hold around 17.5%, 5.6% and 4.8% respectively. 

Position: Share strong support price is INR 1040/980. Long term investor should continue with the company and any good correction will give good opportunity to add for long term basis.

Share View: Share price high 1,390 (52 week) and now 1,107. Titan Company Limited is an Indian consumer goods company that mainly manufactures fashion accessories such as watches, jewellery and eyewear. Part of the Tata Group

Opportunities

Company was good business visibility till Feb 2020 after Global pandemic on Covid -19 company businesses were drastically down washed in the month of March, April and part of May and June 2020. Weddings season and Akshya Tritiya sale were also down due to restrictions. The Jewellery division is targeting for full recovery in the fourth quarter. Gold prices have been on sharp uptrend for more than a year and gold is now being considered as an attractive asset class too. Jewellery division covered around 80% of their topline through their flagship store “Tanishq” largest Jewellery retailer in country. The Company has managed the cash situation very well and the bullion sale of INR 601 cr helped the Company turn net cash positive in the quarter despite the low level of revenues.

Risk

Losses in this quarter on every segment of their business due to shut down of stores Covid-19 pandemic That shut businesses and left millions jobless, pushing the economy on course for its first full-year contraction in more than four decades. And as uncertainties rose, a flight to safe havens led to an eye-popping rally in gold prices. Q2 will also be challengeable as currently economic stress and Covid-19 outbreak can’t be discounted. Titan said 83% of the company’s stores had opened by the end of June. But even then many of them were not operating for all days and further very limited footfall in all the stores.

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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