Watches were relatively better with a 7.5% revenue growth despite a 10% decline in volumes. Headline PAT fell c19%, which was lower than expectations (but had a one-off cR17-crore charge related to savings scheme inventory).
Near-term earnings revival is unlikely due to ongoing demand weakness in Q4 FY14 and Q1 FY15 faces a high base, but this is already discounted. Titan has corrected significantly (c16% in past three months) and weakness on the back of these results will tend to summarise the short-term uncertainty.
We think it is the risk worth taking now. A key catalyst, in our view, will be any progress in reversal of gold regulations. We believe retail expansion and low base in Q2 FY15 will be a potential tipping point for strong earnings growth revival. Titan aims to double its jewellery market share in five years, led by retail expansion and marketing mix, which we think is a realistic target. We keep our target price unchanged at R260, but upgrade the rating from neutral to overweight.