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Titan: Bottomline up 234% - Views on News from Equitymaster
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  • Nov 19, 2003

    Titan: Bottomline up 234%

    Titan continued to show the signs of turnaround as the Indian watches major posted a healthy growth of 13% in the topline for 2QFY04. However, the bottomline grew at a faster rate. Both operating and net profit margins of the company improved significantly.

    (Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Net sales 1,811 2,048 13.1% 3,102 3,693 19.0%
    Other Income 5 5 4.2% 7 11 45.2%
    Expenditure 1,623 1,801 11.0% 2,894 3,418 18.1%
    Operating Profit (EBDIT) 188 248 31.9% 209 275 31.9%
    Operating Profit Margin (%) 10.4% 12.1%   6.7% 7.4%  
    Interest 110 109 -1.5% 216 211 -2.3%
    Depreciation 55 55 1.3% 111 110 -1.2%
    Profit before Tax 28 89 221.4% (111) (35) -68.4%
    Tax 9 27 194.4% (29) (23) -20.6%
    Profit after Tax/(Loss) 19 62 234.4% (82) (12) -85.4%
    Net profit margin (%) 1.0% 3.0%   -2.6% -0.3%  
    No. of Shares (m) 42.3 42.3   42.3 42.3  
    Diluted Earnings per share* 1.8 5.9   (3.9) (0.6)  

    The performance looks stronger on half yearly basis as the topline grew by 19% and company reduced its losses by 85% as compared to same period last year. Growth in the topline came from both watches and jewelry segment as is evident from the table below. Excluding Rs 10 m as charges towards VRS, operating margins have shown a 220 basis points growth for 2QFY04. This is a commendable performance and highlights the steps taken by the company to become profitable.

    Lets have a look at the segmental break-up of the company’s performance.

    (Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Watches & Clocks 1077 1339 24.3% 1831 2248 22.8%
    PBIT 91 111 21.2% 74 81 8.6%
    Jewellery 893 891 -0.3% 1276 1451 13.8%
    PBIT 45 86 91.6% 29 89 207.2%

    A growth of 24% in watches & clock segment compensated for the marginal dip in the revenues from jewelry segment for the September quarter. Marginal dip in revenues from jewelry is due to seasonal reasons. Sale for the jewelry segment is likely to pick-up during the second half as the festival and marriage season approaches. However, the PBIT margins for jewelry segment improved by around 400 basis points during the first half.

    As far as future growth prospects are concerned, Titan has been talking about capital infusion required to restructure business and reduce high cost debts. Lack of funds has been hampering the company's ability to reinvest in the business for future growth in the last two years (debt equity ratio is at a concerning level of 2.4 times). If cash infusion comes in, Titan will not only be able to reduce interest charges but also restructure its working capital to unlock cash. At the current price level of Rs 116, the stock trades at P/E multiple of 19.7annualised 2QFY04 earnings. However, the first half is not the true representation of the annual performance because the sales and profit are skewed to second half as marriage and festival season starts from October onwards.



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