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Titan's Shares Rally Following Release of 2Q Results

Nov 1, 2012 6:24 AM   By Dilipp S Nag
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RAPAPORT... Shares of Titan Industries Ltd., which owns the Tanishq brand, rose as much as 11 percent to a 52-week high of INR 286.90 per share today  on the Bombay Stock Exchange (BSE).  The rally came after the company reported on Wednesday that net sales rose 10 percent year on year to $416.8 million (INR 22.58 billion) in the second quarter that ended on September 30. Net profit increased 21 percent to $33.2 million (INR 1.80 billion).

The stock pulled back slightly in the late afternoon hours and closed 9.8 percent higher for the day at INR 284.90 a share, while the BSE’s Sensex index ended  0.3 percent higher at 18,561.70.

Brokerage firm Motilal Oswal stated that Titan’s second- quarter profit met its estimate of INR 1.74 billion, led by a 280 basis-point-margin expansion for jewelry, to 12.5 percent, an all time high, even as jewelry sales came below expectations.

The company reported that jewelry sales rose 6 ‎percent year on year to $318.2 million (INR 17.24 billion) but persistent high gold prices affected gold volume sales as customers paid more but bought lower quantity.

The brokerage said that Titan’s jewelry sales volume declined 11 percent due to high gold prices and subdued consumer sentiment. “Reported revenue growth in jewelry is impacted by lower stocking by franchisees due to a shift in the festive season. The management has indicated that there is an improvement in volume trends with volumes flattening in [the third quarter],” it noted.

Motilal raised its rating on Titan’s stock to “buy” from “neutral” and revised its price target to INR 300 for  shares, citing an expected recovery in jewelry performance. The brokerage said that the expected pick-up in consumer sentiment and retail sales growth coupled with aggressive expansion in jewelry should drive jewelry division recovery.

“We expect improved consumer sentiment and higher number of wedding days to improve jewelry revenue in the second half of the year,” Motilal added.

Titan opened 32 stores during the quarter to end the period with a network of 879 ‎stores across its watch, jewelry and eyewear product divisions. The company plans to introduce several new products and open many stores in the third quarter.

“We like Titan’s planned efforts to expand its geographical presence in a muted economic environment. This will likely help it to create a strong base which in turn will prove beneficial when the overall macro-economic environment improves,” Kotak Securities wrote in a note to clients. 
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Tags: Dilipp S Nag, Festival, India, Jewelry, Tanishq, Titan, Titan Industries, watch
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