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Titan: Sales up but margin contracts - Views on News from Equitymaster

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Titan: Sales up but margin contracts
Aug 1, 2013

Titan Industries declared its results for the first quarter of financial year 2014 (1QFY14). The company reported 40.9% YoY growth in sales, while net profit grew by 16.9% YoY for the quarter. Here is our analysis of the results.

Performance summary
  • Net sales increased by 40.9% YoY during the quarter. Segment wise, jewellery revenue grew by whopping 47.2% YoY, Watches segment grew by 11.4% YoY. Poor growth in watches segment was due to decline in discretionary spending. ‘Others’ segment which includes precision engineering, eyewear and accessories grew by 37.5% YoY.
  • Total raw material cost this quarter has increased by 49% YoY. As a percentage of sales, raw material cost has increased from 73.7% in 1QFY13 to 77.9% in 1QFY14. This has led to increase in operating expenditure by 43.6%, which is more than the sales growth.
  • Due to high operating expenditure, operating profit has increased by mere 15.6% YoY despite a much better top line. As a result, EBITDA margin has decreased to 7.9% YoY in 1QFY14 from 9.6% in the corresponding quarter of previous year.
  • Other income for the company grew by 51.7% YoY during 1QFY14.
  • Interest cost grew by 35.2% YoY during the quarter.
  • Impacted by subdued operating performance, profit after tax increased by 16.9% YoY during the quarter.

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