Titan shares slip 3% on mixed Q1 earnings — should you stay put or book profits?

According to Titan's management, this was more an outcome of muted consumer sentiment rather than competition, Nuvama Institutional Equities said in its research note.

"We are trimming margins, but keeping it in the lower end of guidance (12.5 percent); our FY24 EPS (earnings per share) hence edges down only 4 percent," Nuvama said.

"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 or hallmarking. While we stay confident on market-share gains, on Titan's cross-functional strengths and incremental growth potential from International, Taneira and Handbags, we retain HOLD on near-term margin uncertainty," brokerage Emkay said.

Analysts believe Titan is investing for future growth, which is reflected in rationalization of physical gold premium, increased advertising and consumer activations and exchange schemes in a tough demand environment, which bodes well for long term growth.

"Demand trends in July remain strong across segments, which gives us confidence of pick up in margins in coming quarters," said Amnish Aggarwal - Head of Research at Prabhudas Lilladher Pvt Ltd.

Aggarwal says Titan is creating multiple growth levers led by jewellery segment gains due to network expansion, regional thrust and higher growth in sub brands like Mia, Zoya and Caratlane; Omni-channel strategy across jewellery, watches and eyewear; new growth drivers like Caratlane, Titan Eye+, Taneira; and strong growth in wearables with smartwatch in mass segment.

The company's strong financial position and efficient distribution model have allowed it to outperform its competitors in terms of store expansions. It aims to increase jewelry revenue by 2.5 times by FY27, implying an impressive compound annual growth rate (CAGR) of 20 percent. With a current market share of 7 percent in a sizable Rs 4 trillion market, there is a significant room for growth.

The gradual recovery in the studded ratio is expected to support improved gross margin in the future. Its positive growth outlook along with favorable industry trends and a strong balance sheet make it a compelling option in the discretionary sector, analysts at Motilal Oswal said.

"Titan has an impressive track record of outperforming its peers as well as exceptional long-term growth potential, all of which justify its premium valuations," according to Motilal.

Following Titan's mixed Q1FY24 print, top brokerages came out with their views on the stock. While Jefferies has a 'Hold' rating on the counter with a target price of Rs 2,650, HSBC has a 'Buy' call with a target of Rs 3,580. Morgan Stanley, meanwhile, has a 'Equal-weight' rating on the Titan stock, with a target of Rs 3,190.

Domestic brokerage Nuvama has a 'Buy' rating on the counter, while Prabhudas Lilladher retains 'Accumulate'. Kotak has taken a 'Neutral' view, while Motilal Oswal reiterated its 'Buy' rating on the Titan stock.

Titan has a target price of up to Rs 3,580, implying an upside potential of 24 percent from the current market levels.

Shares of Titan were trading nearly 3 percent lower at Rs 2,896 apiece in Thursday's late afternoon deals. The stock tumbled 5 percent in the last one month, while it gained 13 percent so far this year.