Target: ₹4,030

CMP: ₹3,281.65

Titan’s jewellery margin missed our estimate. While the FY25 target of 20 per cent jewellery revenue growth and 12-13 per cent EBIT margin was retained, the management’s tone was slightly cautious. The spike in gold prices temporarily benefits competitors that typically do not hedge.

Watches margin was impacted by inferior mix with rising share of wearables. Caratlane revenue increased by 29 per cent y-o-y slightly lower compared to 32 per cent y-o-y in Q3FY24.  

In the past, Titan has mentioned that lab-grown diamonds are not a threat. This time, the management said that while it is not having any impact yet, the company is watchful. Titan’s $20 million investment in a US company, specialising in lab-grown diamonds, has not done well. Hence, Titan has taken a 30 per cent impairment charge on the investment.

Titan will prioritise growth over margins and H1-FY25 margins are likely to be under pressure. We have lowered our margin assumption from 12.8 per cent to 12.1 per cent in FY25 and expect a recovery to 12.4 per cent in FY26. We mostly retain our sales growth estimates but cut our margin estimates, resulting in 6-7 per cent cuts in FY25-26 EPS.

Despite near-term weakness, we expect 20 per cent earnings CAGR over FY24-26 for Titan. Retain O/P.