Titan Company Shares Fall On Weak Q4 Earnings

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Titan Company shares fell over 3 per cent on Monday as the jewellery retailer reported a 14 per cent fall in net profit in the March quarter.

Titan reported a net profit of Rs 184 crore in Q4, while its revenues declined by 1.5 per cent to Rs 2,437 crore. The Tata group firm had reported a net profit of Rs 215 crore on sales of Rs 2,474 crore in the year ago period.

Titan said its jewellery sales, which contribute nearly 80 per cent of its revenues, were affected by jeweller’s strike in March. Jewellers went on an indefinite strike in March to protest over the reintroduction of sales tax on gold jewellery after four years. The strike continued for 43 days impacting jewellery sales all over India.

“Titan’s Q4 earnings were below estimates on all counts amid a weak macro, new regulatory controls for jewellery business.. and one-offs in the watch business,” domestic brokerage Religare wrote in a note to clients.

Titan’s EBIT (earnings before interest and tax) margin contracted 160 basis points to 11.1 per cent in Q4, led by negative operating leverage (lower sales resulting in lower operating profit).

Revenue from Titan’s watch business fell 13 per cent to Rs 440 crore in March, while its operating margin of the segment fell 380 basis points to 5.7 per cent due to rationalisation of employee costs and inventory provisioning at few stores, Religare added.

However, Titan’s management is optimistic that it will achieve better sales growth in FY17. Titan has seen 15-20 per cent revenue growth in April 2016, the company said.

Reliagre has a “hold” rating on Titan Company with a price target of Rs 360. The brokerage said at current valuation the stock trades at 38 times its estimated FY18 earnings per share, which offers limited room for upside.

As of 11.47 a.m., Titan Company shares traded 0.85 per cent lower at Rs 362.35 apiece compared to 1.46 per cent gain in the broader Sensex.