Shares of Titan declined by 2.56 per cent to ₹2,902.30 on the BSE on Thursday after the company reported a 4.3 per cent drop in its consolidated net profit in the June quarter (₹756 crore as against ₹790 crore in the same quarter of the previous financial year). The company’s margins were lower than the Street expectations.

Though analysts see near-term headwinds, in long-turn most believe it as safe bet. According to them, key risks are competition in jewellery segment.

According to Motilal Oswal Financial, the margins were adversely affected by seasonality, volatility in gold prices, and a one-time diamond price inventory gain in Q1 FY23. The domestic brokerage firm affirmed that there were no material changes to its FY24 and FY25 forecasts.

It said that the company aims to increase jewelry revenue by 2.5x by FY27, implying an impressive CAGR of 20 per cent. “There is a significant room for growth,” the report said.  

Adding that the gradual recovery in the studded ratio is expected to support improved gross margin in the future, “We reiterate our Buy rating with a target price (TP) of ₹3,325,” Motilal Oswal said. 

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Emkay Global Financial Services report reduced the target price to ₹3,000, on a 6-8% earnings cut and 3M rollover. Titan attributed the 250 bps dip in jewellery margin to the 100bps one-off, inferior regional mix, and growth investments (gold price correction, higher gold exchange and marketing), per the report.  

“In our view, street’s margin estimate will now gravitate to the lower end of the guided band on Q1 disappointment and high competitive intensity/hallmarking. While we stay confident on market-share gains, Titan’s cross-functional strengths and incremental growth potential from international, Taneira and handbags, we retain Hold on near-term margin uncertainty,” the report said. 

Wearables remain key

Prabhudas Lilladher’s reported that jewellery demand in April/May was subdued due to volatility in gold prices, while the demand in June and July was driven by stable gold prices. It added that the wearables segment remains a key growth driver with Fastrack launching new smart watches.

Analysts have maintained the FY24 EBIT margin guidance at 12-13 per cent and added that the jewellery demand remained strong in July. Analysts of Prabhudas Lilladher decreased the target price from ₹3,242 to ₹3,240. 

Among the global brokerages., Morgan Stanley retained its Equalweight (with a target price of ₹3,190), while Jefferies stayed Neutral (TP: ₹2,650).

However, HDFC Securities advised Reduce on Titan. According to the brokerage, consumer demand normalisation amid rising competition will keep jewellery margins under pressure.

“Hence, we cut FY24/25 EPS estimates by about 3 per cent each and maintain our Reduce rating with a DCF-based TP of ₹2,600/sh (implying 49x Sep-25 P/E),” it said.

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