Titan Company surges 5% on strong Q3 results; stock hits new high

The stock rallied 5 per cent to Rs 1,044, surpassing its previous high of Rs 1,006 recorded on April 18, 2018, on Monday in an otherwise weak market.

Shares of Titan Company gained 5 per cent to Rs 1,044 apiece, hitting a new high on the BSE in early morning trade after the company reported strong growth of 41.6 per cent in net profit of Rs 416 crore in December quarter (Q3FY19). The company had a profit of Rs 308 crore in the year-ago quarter.

The stock surpassed its previous high of Rs 1,006 recorded on April 18, 2018, on Monday in an otherwise weak market. The S&P BSE Sensex was down 0.5 per cent at 36,298 points at 10:00 am.

Titan’s sales income during the same period grew by 35 per cent at Rs 5,632 crore against Rs 4,174 crore in the corresponding quarter of previous fiscal.

The company’s jewellery business reported a robust 37 per cent sales growth mainly led by grammage growth of 20 per cent. The segment benefited from strong growth in both plain and studded jewellery. The plain jewellery segment was driven by a large order from institutional order of Rs 200 crore.

Jewellery segment EBIT (earnings before interest and tax) margin was higher at 13.3 per cent led by higher gross margins, lower discount, inventory valuation loss recovered from the last quarter (Rs 18 crore), lower advertising spends in the quarter as well as operating leverage driven by strong revenue growth.

Analysts at Dolat Capital believe the growth in jewellery category would continue, despite unfavorable base benefiting from new store additions and new customer acquisition.

“Further, Titan, being one of the largest players in the organized industry with attractive offerings, we believe that it would emerge as a clear winner of the shift from unorganised to organised. Furthermore, changing trend of buying jewellery for fashion instead of investment would enhance premiumization,” the brokerage firm said in result update with ‘buy’ rating on the stock and target price of Rs 1,139 per share.

“Profitability across the divisions was mixed with margins in watches being impacted by high ad spends. Management continues to maintain a 15 per cent EBIT margin target for the division. Jewelry margin expansion was impressive, but was partly supported by inventory gain and lower ad spends. The focus remains on growth, and share gains can drive further margin expansion through operating leverage,” analysts at Emkay Global Financial Services said in result update.

“We have increased our FY19- 21 estimates by 1-3 per cent, factoring in the strong quarterly performance. Given the 20 per cent plus earnings CAGR, valuations at 48 times FY20E EPS are attractive relative to peers. We remain positive and maintain Accumulate with a revised TP of Rs 1,080, valuing it at 45 times Dec- 20E EPS”, it added.

At 10:09 am; Titan Company was trading 4 per cent higher at Rs 1,032 on the BSE. The trading volumes on the counter nearly 10-fold with a combined 4.8 million equity shares changed hands on the BSE and NSE so far.