Titan Company slips 4%, hits 6-month low on subdued Q1 earnings

Shares of Titan Company hit a six-month low of Rs 999, down 4 per cent intra-day on the BSE on Wednesday after it reported 6 per cent year-on-year (YoY) growth in standalone net profit at Rs 371 crore in the June quarter (Q1FY20), due to lower-than-expected revenue. The firm had posted a profit of Rs 349 crore in the year-ago quarter.

The stock was trading at its lowest level since February 1, 2019, when it hit Rs 985 in intra-day trade.

Its revenue grew by 14 per cent YoY led by lower-than-expected growth in jewellery segment, 13.3 per cent YoY growth, on the back of tough macro environment and weak consumption trend.

Analysts, on an average, had expected a profit of Rs 414 crore and revenue of Rs 5,162 crore for the quarter.

“The jewellery division recorded revenue growth of 13 per cent, below the company’s internal expectation, as consumer demand fell in the month of June on sudden surge in gold prices and slowdown in consumption,” Titan Company said in a press release.
Expecting H1FY20 to remain muted, the Management looks forward to more than 20 per cent growth in H2FY20.

Analysts at Dolat Capital said the growth in the jewellery segment will remain muted (low double digits) in Q2FY20E.  However, they anticipate an increase in growth in H2FY20E, due to new store additions, customer acquisition, and anticipated improvement in overall economy. The brokerage firm downgraded the rating on the stock to ‘accumulate’, with target price of Rs 1,172 per share.

“Titan remains the biggest beneficiary of the formalisation theme with its jewellery division gaining market share from the unorganised players. Increasing female working class, strong brand recall, trust and transparency are the key factors that are likely to drive above industry growth for the company," analysts at Reliance Securities said in result update.

Titan remains one of the fastest growing companies in the consumer space with multiple growth levers and sectoral tailwinds. Consistent RoE of more than 20 per cent in the coming years and strong cash flow generation ability is likely to aid Titan to trade at premium valuation,, the brokerage firm said and maintained ‘Hold’ recommendation on the stock with a revised target price of Rs 1,110 (from Rs 1,222 earlier).

At 12:18 pm, Titan Company had erased partially its early morning losses and was trading 1 per cent lower at Rs 1,024 on the BSE. The trading volumes on the counter more than doubled with a combined 6 million shares changing hands on the BSE and NSE so far.