TITAN Q4 RESULTS REVIEW: BROKERAGES SLASH TARGET PRICES, HIGH GOLD PRICES TO HIT DEMAND

Brokerages slashed their target prices on Rakesh Jhunjhunwala-backed Titan Company stock, after the jewellery major's Q4 results fell short of expectations.

Titan reported a standalone net profit of Rs 786 crore for January-March quarter, a growth of 7 percent on-year. However, a Moneycontrol poll had pegged the profit to rise 10.5 percent on-year at Rs 811 crore.

The jeweller and watchmaker's revenue came in at Rs 10,047 crore, rising 17 percent on-year, the company said in a regulatory filing. The brokerages pegged revenue at Rs 11,054 crore.

Jewellery segment leads growth

Titan's total income from the jewellery increased by 19 percent compared to the same period last year, reaching around Rs 8,998 crore. The Indian business specifically grew by 20 percent during this time.

Also Read | Titan says ‘comfortable’ with debt levels, financial stance balanced

Domestic buyer growth came in healthy double-digits YoY, average selling prices (ASP) saw single-digit rise and new buyer contribution was ~54 percent of jewellery customers for the quarter.

Goldman Sachs said that the strong revenue growth sustained, but the competitive intensity ahead will cap its margin expansion potential for FY25.

Titan’s Q4 PAT missed estimates due to 70-100 bps jewellery margin miss and higher subsidiary loss. Whereas jewellery topline growth is healthy at 20 percent, the margin miss is a factor of high competition and higher gold mix in studded sales, said Emkay Global.

Watches, wearables see weakness

The watches segment had a weak quarter, as the topline was high due to high competition. The business achieved a total income of around 940 crores in the quarter, marking an 8 percent rise year-on-year.

The category is seeing pricing pressure due to excess inventory with competitors. Titan expects the froth to settle in 3-4 months. The firm will continue to focus on top-line growth, and margins are expected to follow, with increase in scale.

However, UBS said the demand environment will remain weak, with margins to be impacted by high discounts and offers.

Surging gold prices to impact Q1 demand

Margins are likely to remain soft in the jewellery segment in the near term as the competitive intensity is increasing along with rising gold prices. Demand for the upcoming quarter is likely to be hit by the jump in gold prices, leading to dampening consumer sentiments, the ongoing elections and lesser wedding dates.

“The near-term growth outlook appears subdued due to high gold inflation affecting demand sentiments, which is a typical trend during inflationary periods,” said Motilal Oswal.

Despite the near-term jitteriness, Titan remains aggressive in its growth outlook, driven by new store additions, attractive designs, and market share gains, added the brokerage. Titan also said it shall continue with promotions to drive aggressive growth and customer acquisitions.

Should you buy, sell, hold?

International brokerage Jefferies retained its ‘hold’ call on the player, and said the share price is likely to see weakness in trade on May 6. In the near-term, the stock is likely to stay range-bound.

Nuvama Institutional Equities downgraded Titan to 'hold', slashing its target price to Rs 3,867 from Rs 4,106 apiece. Emkay Global also reduced its target price on Titan, cutting it by around 4.6 percent to RS 4,150 per share.

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2024-05-06T03:32:21Z dg43tfdfdgfd