Shares of jewellery major Titan gained over 2% to touch an intra-day high of Rs 3,748 on the NSE after the company reported a 25% year-on-year (YoY) growth for the quarter ended September, as per its quarterly business update. The positive performance has led several brokerages to reiterate their optimism on the Tata group firm.
Expansion and Growth in Jewellery Segment
During the second quarter, Titan added 75 new stores, expanding its total retail network to 3,171 stores. Jewellery domestic operations saw a robust 25% YoY growth in Q2, following a relatively subdued Q1 performance.
Titan attributed the growth in jewellery sales to a rise in consumer demand, which picked up significantly after the reduction in customs duty on gold imports from 15% to 6%. “This reduction led to a strong double-digit uptick in gold sales for the quarter,” the company mentioned in its exchange filing.
Brokerages Bullish on Titan’s Performance
Macquarie reiterated its “outperform” rating on Titan, citing the company’s strong quarterly commentary. The brokerage set a target price of Rs 4,100 per share, noting that the sales figures surpassed its expectations.
Better-than-expected jewellery sales and healthy growth in the watches segment compensated for weaker performances in the eyewear and other businesses. Macquarie also projected a 9% EBITDA growth for Titan in the upcoming quarterly results.
Emkay Global on Titan Company
Domestic brokerage Emkay Global echoed this optimism, stating, “Titan has exceeded our growth expectations across most business segments.” Emkay highlighted the 26% YoY growth in jewellery sales during Q2, outperforming its estimate of 15%.
The brokerage noted that this strong performance would alleviate investor concerns about potential growth moderation and drive a 4-5% upward revision in earnings estimates. Emkay maintained a ‘buy’ rating, with a revised target price of Rs 4,400 per share.
Mixed Signals from Solitaires and International Market Trends
In its business update, Titan also noted a divergence in performance between different jewellery segments. While the non-solitaire studded jewellery segment registered high double-digit growth, the solitaire category saw a decline, largely due to price uncertainty in international markets. Overall, studded jewellery sales grew in the low double-digits for the quarter.
Citi on Titan Company
International brokerage Citi weighed in on the performance of Titan’s solitaire business, stating that the decline could be attributed to changing customer attitudes amidst rising gold prices and falling diamond prices.
The increasing popularity of lab-grown diamonds has created uncertainty around the value proposition of natural diamonds. Citi maintained a “neutral” rating on Titan, with a target price of Rs 4,110 per share.
Investec Cautions on Margins
While acknowledging the strong revenue growth of 25% YoY, Investec raised concerns about Titan’s margins. The brokerage noted that the weak performance of the studded jewellery mix could potentially impact profitability.
Investec maintained a ‘hold’ rating, with a target price of Rs 4,100 per share, cautioning that the reported PAT (profit after tax) might be muted despite the robust top-line performance.
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