Titan shares slip 3% on soft Q1 numbers; is it a buying opportunity?

Titan Company Q1: Shares of Titan Company slipped as much as 3.15 per cent to Rs 2,884.55 apiece on the BSE on Thursday, a day after the company reported muted numbers for the June 2023 quarter. Its EBIT margin saw a decline of 226 basis points to 10.7 per cent. Its net profit, or profit after tax (PAT), on a standalone basis, came in at Rs 777 crore, down 2 per cent while its total income grew 19 per cent YoY to Rs 10,306 crore. READ MORE

JM Financial notes that a rather generous gold-exchange offer to attract buyers caused a significant erosion in gross margin and led to lower profit as compared to the year-ago level, despite strong growth in topline. However, what is comforting is that the issues aren’t structural in nature, and the impact, therefore, should not be long-lasting.

"We believe management retaining its 12–13 per cent margin guidance is a testimony to this. Demand seems rather resilient thus far; July growth appears to be close to the 1Q range. The stock could react negatively to the weak Jun-Q result—a buying opportunity, in our view," the brokerage added. It has set the target price at Rs 3,070.

Analysts at Centrum Broking say they remain upbeat about Titan’s operating performance, led by strong pent-up demand across business segments, yet its footing in the international market appears to be promising. 

"We note Titan’s strategy revolving around serving millennials, meeting their aspirational demand with the introduction of new designs and channels, yet the rising share of wedding jewellery could pay richly in our view. Furthermore, rising interest rates and industry formalisation are showing up in market share gains for Titan," the brokerage said in its Q1 results review note.

Given a turnaround in the Caratlane, watches, and eyewear divisions and continuity in their profitability potential and a stable margin outlook, the brokerage has tweaked Titan Company's FY24E and FY25E earnings by 4.1 per cent /6.0 per cent, respectively, and retained BUY with revised TP of Rs 3,400 (implying 60.9x FY25E EPS).

Titan Company's brand-building initiatives across segments, increasing customer base, store expansions and development in international markets continue to be impressive, says Motilal Oswal Securities. "We reiterate our BUY rating with a TP of Rs 3,325," the brokerage added.