Titan rallies 6% in 2 days ahead of December quarter business update

Titan share price had underperformed the market and recorded negative returns of 11 per cent in the previous calendar year 2024, the first time it has done so in the past eight years

Shares of Titan Company, the owner of the Tanishq brand of jewellery stores, were up nearly 2 per cent at Rs 3,457 on the BSE in Friday’s intra-day trade, extending their Thursday’s rally ahead of the release of the company's December 2024 quarter (Q3FY25) business update. In two days, the stock of the jewellery company has surged 6 per cent. In comparison, the BSE Sensex was down 0.54 per cent at 79,513.27 at 10:23 AM.

 

The company’s profitability for the September quarter (Q2FY25) was quite depressed on account of the customs duty related losses, as well as the need to invest in the growth of various businesses. However the company's management had said they are quite confident about the competitiveness of each of the company’s businesses and remain optimistic about the performance for the rest of the financial year.

 

 

In the previous calendar year 2024 (CY24), Titan had underperformed the market, and recorded negative returns for the first time in the past eight years. In CY24, the stock fell 11 per cent, as compared to a 9 per cent rise in the BSE Sensex.

 

During Q3FY25, the market price of Titan had slipped 15 per cent as the company reported a weak set of numbers, with profit after tax declining 23.1 per cent year-on-year (YoY) at Rs 704 crore for the quarter. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin contracted 416 bps to 8.7 per cent. The company reported a 25 per cent YoY growth in its domestic jewellery operations after a relatively soft June quarter (Q1FY25). 

 

Titan said consumer demand significantly picked up momentum after the reduction in custom duty on gold imports, to 6 per cent from 15 per cent earlier, leading to a strong double-digit uptick in gold (plain) for the quarter. The non-solitaire studded segment recorded growth in high double-digits, whereas the solitaire segment saw a decline amidst price uncertainty and demand supply dynamics in the international markets, both together resulting in overall studded sales growth of low double-digits for the quarter.

 

The company's H2 margins are expected to be better than H1, aided by good demand and a better mix. Titan's management has guided for 11-11.5 per cent normalised consolidated margins for the jewellery business in FY2025. It further indicated that festive demand has been excellent, and wedding demand has picked up and is expected to maintain momentum for the next 1-2 quarters. Demand for non-solitaire and smaller size solitaire in studded jewellery is good, while demand for large solitaire stones is impacted by a price correction.

 

Titan's diversified portfolio of jewellery, watches, and eyecare businesses has demonstrated a strong revenue growth, driven by robust demand for studded jewelry, analog watches, and eye care products. However, margins were under pressure and the management also lowered its EBIT margin forecast for FY25. With a solid foundation for growth established, Titan's focus on product innovation, retailing, branding, and premiumisation is likely to continue driving growth in its core businesses, analysts at Geojit Financial Services said in the company's Q2 results update.

 

Mirae Asset Sharekhan said Titan’s Q2FY2025 performance was impacted by lower margins in the jewellery business. Double-digit revenue growth momentum is likely to continue in the coming quarters driven by growth across businesses. A strong growth outlook, focus on sustained market share gains, and a strong balance sheet make Titan the best play in the discretionary space. The pressure on margins is short-term and the management expects an uptick in margins in the medium-term, the brokerage firm said in the result update.

 

Despite near-term margin headwinds, the company is confident of maintaining good growth momentum in the quarters ahead, led by market share gains, network expansion, and a shift to trusted brands. The company aims to achieve consistent double-digit revenue growth over the next five years by strengthening its core businesses such as watches, jewellery, and eyecare through efficient capital allocation. Further, profitability is expected to consistently improve with a consistent growth in the jewellery business and scale-up of new ventures, the brokerage firm said.