Titan Company Posts Disappointing Performance In Q3FY14 Net profit Falls 18.8%

Titan Company (TCL) formerly known as Titan Industries posted its October-December FY14 result after market hours (January 29, 2014). TCL posted disappointing financial performance on both topline and bottomline front. Also the company's margins have shrunk on yearly basis.

TCL's topline declined by 11% on yearly basis at Rs 2675.8 crore as against Rs 3017.8 crore in the previous quarter last year. The reduction in revenue is registered primarily due to the drop in sales in its Jewellery segment. The income from this segment was 84% of the net sales, which has come down to 80% in Q3FY14.The Jewel segment revenue stood at Rs 2126.67 crore, declined by 15.5% in the quarter under consideration. Whereas it’s Watch segment has grown by 7.5% to Rs 455.5 crore (17% of sales in Q3FY14). In line with this, its other business which includes eyewear, precision engineering, B2B and accessories business has reported a growth of 18.6% to Rs 116.5 crore in Q3FY14.

Although, TCL has cut down its cost for material consumed during the third quarter in FY14, led by which its operating expenses has dropped by 11% to Rs 2430.6 crore on YoY basis. However, the expenses remained unchanged as a percentage of sales at 90.8%. EBITDA decreased to Rs 245 crore, lowered by 13% on YoY, and EBITDA margin also reduced by 21 basis points to 9.16%.

On profit front, TCL's bottomline reduced by 18.8% from Rs 203.9 crore in Q3FY13 due to lower sales and higher rise in finance expenses (increased by Rs 15.7 crore to Rs 27.4 crore). PAT margin affected by 57 basis points to 6.19%.

As said by the management, the decline in topline, bottomline and hence margins was due to the weaker consumer sentiment in last quarter, which has affected the sales despite of the festive season during this period. Bhaskar Bhat, MD of TCL said, they will continue to make investments in mass communication for their brand building in coming quarters. 

However, due to the lower consumer sentiment in jewellery segment and government policies to curb the higher demand of the gold import, will affect the company in coming quarters, as TCL's major revenue driver is jewellery segment. On valuations front, TCL stock is still trading at higher price-to-earnings ratio of 25x.