Ways2Capital Reviews : Titan Down ~5% After Announcing Muted Jewellery Segment Growth In Q1FY19

Titan company Ltd’s shares fell by ~5% during the day. It has recently announced its pre result update of Q1FY19. In the Jewellery segment, the company has recorded sales below its internal targets. In Watches segment, owing to continued focus on introducing new designs and engaging marketing campaigns is bringing back customers to this category.

The year has started off well for Titan Company Ltd (Titan) with continuous gains in market share across segments. The company's Watches and Eyewear divisions have shown good growth in Q1FY19. The company’s efforts in re-crafting Watches and Eyewear division has started paying off. We project ~8% yoy sales growth during Q1FY19 led by ~8% yoy revenue growth in jewellery segment and ~7% yoy in watches segment. We expect the reported revenue growth for these two segments to be subdued due to the transition to GST (excise duty not deducted from base quarter sales).

Store additions: Titan added 10 Tanishq stores (24,000 sq ft) in Q1FY19 in the jewellery segment. In the watch segment, Titan added 11 World of Titan, 7 Fastrack and 3 Helios stores (14,000 sq ft). In the eyewear segment, Titan added 9 new stores (6,000 sq ft).

The Jewellery industry saw a significant decline in the import of gold by ~39% in volume terms in first five months of CY18. This is primarily led by decline in demand for bullion. Industry also saw weak demand on Akshaya Tritiya day itself, while rest of the quarter saw significant decline compared to previous year. Hence, company has recorded sales below its internal targets.

Q1FY19 has a very high base of comparison (54% yoy growth in Q1FY18). Apart from this Q1FY18 had a favourable one-off impact of ~Rs250cr sales getting advanced from Q2FY18 in anticipation of higher GST rates. Hence, these factors have led to muted sales growth for Q1FY19. In Q1FY19, Tanishq launched Lavanyam, a range of traditional jewellery inspired by the cultural motifs and patterns of South India.
 
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About Bhoomi Desai

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