Braveheart Series: Titan Company - Blockbuster Q2; Q3 Likely to be Muted; Result Update Q2FY15 :: Edelweiss

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Titan Company’s (Titan) Q2FY15 revenue and PAT came marginally above our estimates. Watches margin improved by 280bps YoY despite high promotions. Post seven quarters, like-to-like (LTL) in all formats was in positive territory. Other key positives include: (i) 20% YoY LTL growth in jewellery; (ii) studded posted robust revenue growth of 48% YoY (30% YoY in Q1FY15); and (iii) 33% and 30% YoY jump was seen in eyewear and PED sales. Key negative was the second lowest jewellery EBIT margin in past 11 quarters (due to higher discounts of INR590mn on account of closure of GHS and lower premium on gold prices in Q2FY15 in turn impacting gross profit by INR500mn). The company will launch a new scheme to replace GHS in November and maintain robust space addition (56,000 sq ft added in H1FY15; 56% of FY15 target).

Jewellery sales zoom, watch margins improve

Jewellery sales spurted 60% YoY (grammage growth of 75% YoY). Studded jewellery share stood at 35% (39% in Q2FY14; 25% in Q1FY15). Helios sales clocked 9% LTL YoY growth. Watch clocked 9% YoY volume growth on a low base of 22% YoY decline.

Q2FY15 conference call | Key Takeaways

October is witnessing lukewarm demand for jewellery due to absence of GHS and a bumper Q2. Growth in watches in October also has been lower partially impacted by the big bang sales by online players and higher base. International hedging benefits will begin to surface from Q3FY15. Titan will launch a revised version of GHS with higher minimum monthly installment of INR5,000 (INR1,000 earlier) and 12% annualised returns. The company is also evaluating tie-up with NBFC players to expand scope of its schemes (currently limited to INR6.5bn due to cap of 25% of net worth).

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https://www.edelweiss.in/research/Braveheart-Series-Titan-Company--Blockbuster-Q2;-Q3-Likely-to-be-Muted;-Result-Update-Q2FY15/27413.html