Lifestyle brand Titan Company's September quarter results left brokerages scrambling to cut their price targets on the jeweller and watchmaker, sending the shares lower in early trade on November 6.
At 10.00 am, shares of Titan were trading lower around Rs 3,170 per share on the NSE, down 1.8 percent, off early lows.
Global broking firms Investec and Jefferies both noted that Titan's earnings show came in below consensus even after accounting for the inventory impact after the customs duty cut.
Titan reported a 25 percent on-year fall in net profit at Rs 705 crore for the quarter ended September 30, 2024 as a cut in customs duty on gold imports impacted the bottom-line. The company reported net profit of Rs 940 crore in the year-ago period.
Brokerage Calls
Jefferies said the cut in the jewellery margin guidance would be viewed negatively, partially due to the weak demand for diamond solitaires. The brokerage slashed its target price on the jeweller to Rs 3,400 per share, while reiterating its 'hold' rating.
Investec added that the risk of jewellery margins disappointing on higher competitive intensity apart from a weaker mix could extend into FY26, leading to further cuts in earnings. The brokerage cut its price target to Rs 3,822, down from Rs 4,100 earlier. It also kept its 'hold' rating intact.
Goldman Sachs also reduced its target price on Titan to Rs 3,650 apiece, but kept its 'buy' rating intact. The brokerage too noted that the jewellery margins, and the cut in the margin guidance were disappointing.
Offering a contrary opinion, domestic brokerage Nuvama Institutional Equities bumped up its price target on Titan Company to Rs 4,182, which was earlier Rs 3,955 per share. The brokerage is bullish on Titan's strong top-line growth, including from bullion revenue.
Earnings Fineprint
The company's total income rose 24 percent to Rs 12,458 crore in Q2FY25 as compared to Rs 10,027 crore in Q2FY24. Read more here.
The custom duty cut that was announced in the Union Budget had a significant impact on Titan Company's earnings show; the company saw an impact to the tune of Rs 290 crore. Further, its margins saw a tight squeeze, with the EBIT margins shrinking to 8.7 percent for the quarter, down from 12.8 percent in the same quarter last year.
Adjusting for the impact, the normalised EBIT margin stands at 11.4 percent, down from 14.1 percent in Q2FY24. This drop is primarily due to a reduced share of studded jewellery and higher advertising costs amid intensified competition. The company also noted difficulties in the higher-carat solitaire segment, driven by weak demand and global price fluctuations.
Titan Company's management also reduced its jewellery EBIT margin guidance to 11-11.5 percent for FY25, cutting it from the 11.5-12.5 percent band shared earlier.
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