Titan Q1 Review: Most Brokerages Stay Upbeat As Demand Improves
Here’s what brokerages have to say about Titan’s first-quarter performance...
Most brokerages expect Titan Co.’s sales to recover further, aided by pent-up demand for gold and studded jewellery.
That comes after the country’s largest branded jewellery maker saw its profit tumble sequentially in the quarter ended June. Its revenue, operating profit dropped and margin contracted during the period.
Sales of its mainstay jewellery segment, that accounts for 86.7% of total revenue, fell by more than half. Besides, revenue from all other segments such as watches and wearables and eyewear declined over the preceding three months.
Still, the owner of Tanishq and Fastrack brands beat the consensus estimate of analysts tracked by Bloomberg.
“While we started the quarter with strong business momentum, the second wave of the [Covid-19] pandemic severely disrupted it… [But] the learnings and experience of the past year helped us navigate this quarter’s turbulence much more efficiently,” CK Venkataraman, managing director at Titan, was quoted as saying in its results release.
Ajoy Chawla, chief executive officer (jewellery division) at the company, in a post-earnings conference call, however, said, “We have seen certain pent-up demand on account of gold and studded jewellery from missed milestones (birthday and anniversaries) and seeing evidence of it in June and July.”
Shares of Titan were trading 1.38% down in the early trade on Thursday. Of the 33 analysts tracking the company, 17 have a ‘buy’ rating, 10 suggest a ‘hold’ and six recommend a ‘sell’, according to Bloomberg data. The average of the 12-month consensus price target implies a downside of 1.1%.
Here’s what brokerages have to say about Titan’s first-quarter performance...
CLSA
Maintains ‘sell’, raises target price from Rs 1,370 to Rs 1,380 apiece, still implying a downside of 23.3%.
The company continues to pursue its strategy to gain market share, which could entail higher promotions and customer acquisition cost as well.
Competitive intensity in the near term is likely to remain high.
Management is hoping for faster recovery in lifestyle segments.
Jefferies
Maintains ‘hold’, hikes target price from Rs 1,450 to Rs 1,740 apiece, still a downside of 3.3%.
Raises FY22-24 earnings estimates by 3-10% to factor in stronger Q1 and management commentary on store operations.
Like last year, division lost sales related to Akshaya Tritiya festival. But June exit was substantially better, as restrictions were relaxed and there was good traction on new customers.
Motilal Oswal
Maintains ‘buy’ with a target price of Rs 2,065 apiece, implying an upside of 14.7%.
The recovery in June and July was strong.
Underlying demand remains robust, led by a decline in gold prices and strong wedding demand.
Dolat Capital
Maintains ‘buy’ with a target price of Rs 1,925 apiece, implying an upside of 6.9%.
As approximately 90% of the markets are now open, the brokerage expects improvement in sales growth.
Marketing activities and opening up of markets are expected to drive studded jewellery growth in the coming quarters.
Phillip Capital
Maintains ‘buy’ with a target price of Rs 2,100 apiece, an upside of 16.7%.
Titan Q1 FY22 results were above consensus estimates owing to higher-than-expected gross margin performance of jewellery business.
Operating margin for jewellery business were much higher than expectations due to favourable sales mix and higher-than-expected operating hours at store level.
Increased salience from high-margin studded jewellery (22% vs 18% in Q1 FY21), lower contribution from low-margin gold coins segment (7% vs 14% in Q1 FY21) and curtailment of ad spends led to this beat.