Titan tanks 8% after tepid Q1FY25 show: Should you buy, sell or hold?

Shares of Titan fell 7.56 to Rs 3,201 per share on the BSE in Monday's intraday deals. This came after the company reported a marginal decline in net profits on a year-on-year (YoY) basis

Shares of Titan fell 7.56 per cent to Rs 3201 per share on the BSE in Monday’s intraday deals. This came after the company reported a marginal decline in net profits on a year-on-year (YoY) basis for the first quarter of financial year 2024-24 (Q1FY25).

On Friday, Titan reported a 1 per cent decline in standalone net profit for the June quarter, falling to Rs 770 crore from Rs 777 crore a year earlier, due to reduced demand driven by higher gold prices. 

Despite this, the company's standalone revenue from operations increased by 10 per cent to Rs 11,105 crore in Q1 FY25, up from Rs 10,103 crore in Q1 FY24.

 

On the operating front, the company’s earnings before interest and tax margin improved by 15 basis points to 11.2 per cent in Q1FY25 from 11 per cent in the same period last year. 

According to analysts, Titan reported a slow start to the year in Q1FY25 with lower growth of 9 per cent YoY in the jewellery business primarily due to negligible wedding dates in the quarter that, this coupled with elections had a negative impact on growth. 

“Our first quarter performance reflects mixed consumer trends in lifestyle categories. While the inclement weather conditions during the summers, general elections and lower wedding days impacted retail walk-ins, the growth metrics in Watches & Wearables and EyeCare were quite healthy,” said C K Venkataraman, MD, Titan.

He further said that Titan is steadfastly pursuing market share gains across all business categories and is well equipped to provide a differentiated retail experience to our valued customers. 

The company’s resilience in margins stood out, which improved Y-o-Y due to cost optimisation measures, analysts at Nuvama Institutional Equities noted. Further they said that the next levers of growth would come from the scale up of the international segment, Mia, along with CaratLane. 

The management has set a 15 per cent compound annual growth rate (CAGR) target for the jewellery segment until FY27, including the opening of over 350 stores. In the Q1FY25 earnings call, it said it has accelerated its store expansion plans, guiding for 180–210 new stores in FY25 with particular emphasis on the Mia brand. 

“Incorporating these, we are building in a revenue CAGR of 16.6 per cent in the jewellery segment till FY27 in our estimates and factoring in margins of 12 per cent as guided by management. Hence, we are upgrading the stock to ‘BUY’,” analysts at Nuvama said. They raised their target price to Rs 3,955 (from Rs 3,706).

Moreover, the recent reduction in the gold import duty to 6 per cent from 15 per cent is expected to ease competitive pressure and encourage a shift from unorganised to organised sectors in the short term. That said, analysts also threw caution to the wind considering some medium-term risks.

These risks include the direct or indirect impact of lower gold prices on Tanishq's growth and profitability in studded jewellery, and the potential increase in competitive intensity over the medium to long term, analysts at Kotak Institutional Equities said

The brokerage said that at 66 times the FY2026 price to earnings (PE), the stock is not pricing in these risks. Therefore, the brokerage revised its fair value for Titan’s stock to Rs 3,175 from earlier Rs 3,075, valuing Titan at 55 times its September 2026 PE with a ‘Reduce’ call. 

Global brokerages mostly remained bullish on the company with Macquarie maintaining its 'Outperform' rating on Titan with a target price of Rs 4,100 per share. JP Morgan, on the other hand, has kept a 'Neutral' stance with a target price of Rs 3,450 per share.

Morgan Stanley has also maintained an 'Equal Weight' rating, setting a target price of Rs 3,620 per share. CLSA has continued its 'Neutral' rating, with a target price of Rs 3,948 per share. Similarly, Citi has upheld its Neutral rating, targeting a price of Rs 3,510 per share.

At 11:06 AM; the share price of the company was down 1.54 per cent at Rs 3409 per share on the BSE. By comparison, the BSE Sensex was down 3.03 per cent to 78,531 levels.