For 4QFY2011, Titan Industries (Titan) reported stellar performance, which was ahead of our expectations. The company reported top-line growth of 35.6% yoy to `1,778cr, backed by robust revenue performance by the jewellery and watches segments, which grew by 39% yoy and 17% yoy, respectively. However, EBITDA was lower on account of one-time employee benefit provision. At the same time, PAT grew by 63.7% yoy on account of lower depreciation. We continue to maintain our Neutral stance on the stock
Healthy growth in the jewellery and watches segments improves performance: During the quarter, Titan’s jewellery segment witnessed stellar growth of 39% yoy in revenue to `1,373cr (`985cr) on the back of higher gold prices, higher offtake of studded jewellery and overall strong volume growth (~20%). The jewellery segment also witnessed a ~210bp yoy improvement in PBIT margin to 8.7%. Revenue of the company’s other businesses (eyeware and precision engineering) grew by 161% yoy and managed to curtail loss by 24% to `10cr on PBIT level as compared to loss of `13cr in 4QFY2010.
Outlook and valuation: Although we remain positive on Titan’s growth prospects, we believe at 26.9x FY2013E earnings, it discounts the same fairly well. Hence, we maintain our Neutral rating on the stock.
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