Rakesh Jhunjhunwala's favourite stock slips 4% post Q1 nos; should you buy?

For the April-June quarter, Titan Company posted a pre-tax loss of Rs 335 crore.

Shares of Titan Company slipped as much as 3.78 per cent to Rs 1,065.70 apiece on the BSE on Tuesday after the company reported a disappointing set of numbers for the quarter ended June 2020 (Q1FY21) due to disruptions caused by the Covid-19 pandemic. 

At 09:25 am, the stock was trading 2.88 per cent lower at Rs 1,075.90 on the BSE. In comparison, the benchmark S&P BSE Sensex was trading 0.8 per cent higher at 38,491.24 levels. 

According to the shareholding pattern for the quarter ended June 2020, ace investor Rakesh Jhunjhunwala held 4.43 stake in the company while his wife Rekha Jhunjhunwala held 1.10 per cent stake. Data shows Jhunjhunwala's stake in Titan Company remained unchanged during the April-June quarter. READ MORE

For the quarter under review, Titan Company posted a pre-tax loss of Rs 335 crore. It had reported a profit before tax (PBT) of Rs 523 crore in the corresponding quarter of the previous financial year. Further, it posted a consolidated net loss of Rs 270 crore during the quarter. It had posted a net profit of Rs 371 crore for the corresponding quarter in the previous financial year. The firm posted a decline of 62 per cent in consolidated revenue for the quarter, with total income declining to Rs 1,862 crore, as compared with Rs 4,939 crore in the corresponding quarter of the previous financial year. CLICK HERE TO READ FULL REPORT

What brokerages say

Post the result announcement, brokerages remain mixed on the stock. For instance, analysts at Goldman Sachs have maintained a "Sell" rating on the stock with the target price of Rs 705. The brokerage notes that the company's discretionary purchases (studded jewelry) remain under pressure and also its jewellery sales will remain weak in Q2 as well. 

Those at Morgan Stanley, too, have an "Underweight" stance with the target price of Rs 807. "1Q earnings were weaker than consensus estimates and the macro and business headwinds will likely outweigh market share gain," they said in a rating rationale. The brokerage further expects that full-fledged demand recovery will remain elusive in FY2021.

Among domestic brokerages, Prabhudas Lilladher notes that the company has achieved a recovery rate of 77 per cent /21 per cent /25 per cent for jewelry/watches/eyewear, and it expects a sustained recovery to set in from fag end of 3Q/4Q. "Titan's long term structural story remains intact on account of market share gains, strong balance sheet, franchisee based model, strong brand, and a strong head start in executing strategies like customer safety and Omni Channel across product segments," it said in a result review report. The brokerage advises investors to follow the "Accumulate on Dips" strategy. The target price has been set at Rs 1,057. 

"Titan's track record of 22 per cent earnings growth in the past four years is already among the best-of-breed in a period where most peers are struggling. Growth could perk up to 20%+ levels in the post-Covid scenario. In addition, it could benefit as more peers struggle against Titan's aggression and a tougher operating environment," says Motilal Oswal Financial Services (MOFSL). 

The brokerage has a "Buy" rating with the target price of Rs 1,300 (55x Jun’22E EPS).