The growth in retail jewellery sales in August-September boosted confidence that Titan can weather demand weakness, says HSBC, which has a buy call on the stock.
Shares of Titan Company slipped more than 6 percent intraday on October 9 after the company showed muted growth in the second quarter that saw Citi downgrade the stock to neutral.
The jewellery segment, which contributes around 80 percent to its total business, reported a 2 percent year-on-year decline in the revenue for the quarter ended September substantially due to adverse impact of the hedges matured during the time period.
The company had reported a 13.3 percent growth in the June quarter.
Retail sales in Q2 grew by 7 percent YoY due to growth in August and September. "While retail sales declined considerably in July, between August and September, the retail growth was 15 percent YoY, possibly due to an enhanced level of promotions and schemes," company said.
While downgrading the rating to neutral, with a target price at Rs 1,370, global brokerage Citi said medium-term upside appeared priced in.
The growth in retail jewellery sales in August-September boosted confidence that Titan could weather demand weakness, said HSBC, which has a buy call on the stock and cut the target price to Rs 1,410 from 1,450.
Morgan Stanley remains overweight on the stock, with a target price of Rs 1,450.
Titan's watches business revenue grew by 7 percent in Q2FY20 against 20.4 percent growth in Q1FY20, as weak consumer sentiments led to moderation in growth rate of division.
"Eyewear business division witnessed robust growth of 28 percent for the quarter, partly aided by the participation in Essilor's offer of 'Buy One Get One'," the company said in a BSE filing.
The division added 43 stores during the year to date and also closed 19 stores, ending up with a net increase of about 16,000 square feet of retail space, it said.
Its subsidiary Caratlane showed a 75 percent YoY growth in Q2 revenue despite the softness in the market in the second half of the quarter.
Titan increased its stake in Caratlane by 2.8 percent to 72.3 percent.
The other subsidiary, TEAL, had an overall growth of 9 percent for the quarter and the growth has been at 33 percent for the six months, Titan said. Business outlook for second half of FY20 looked positive, with large orders expected to be executed, it said.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.