The shares of Titan Company will be in focus in trade Friday after the Tata Group firm's December quarter earnings were largely in-line with estimates. The company's topline growth was impressive at 20% and better margins in CaratLane and TEAL negated the weak margins in watches and eyewear sections. The jewellery business EBIT margin was in-line at 12.2% in the third quarter and 12.4% in the first nine months of this fiscal.
Most analysts remained neutral on Titan, saying 20% topline growth appears strong in the current context. There are, however, some cautious voices. They point out that the competitive intensity remains high in the jewellery segment.
Global broking firm Jefferies has maintained a 'Hold' call on the Titan stock on rich valuations, but trimmed its target price to ₹3,600 from ₹3,650 per share. The brokerage said that the operating performance missed forecast, mainly due to lower-than-expected margin but 20% year-on-year growth appears good in the current context. The jewellery business margin remained in a band while watches and eyecare exhibit high volatility.
In its post earnings stock review note, Jefferies said the management remains confident in its outlook and displayed strong execution on growth.
Goldman Sachs too maintains a 'Buy' rating on the counter but slashed its target to ₹4,075 a share from ₹4,125. The foreign brokerage noted that Titan's competitive intensity remains high in jewellery but the company continues to gain market share.
Goldman said the studded demand was soft, but management considers it a blip. However, it said that a strong performance in its jewellery segment continues.
Morgan Stanley, meanwhile, maintained an 'Equal-weight' call on Titan, saying its eyecare business growth was weak but management remains optimistic. The brokerage has a target of ₹3,290 per share on the stock.
What are domestic brokerages saying
Emkay Global has upgraded its rating on Titan to 'Buy' with a target price of ₹4,200 per share, as the brokerage expects a significant outperformance with a 28% compounded profit growth for Titan over FY24-26 as against low-teens for the entire consumer space. The management's stronger outlook also drives 4-5% increase in its EPS (earnings per share) estimate.
Motilal Oswal has slashed its EPS by 7.4% and 3.4% in FY24 and FY25 and reset its margin assumption. With a current market share of 8-9% in a sizable ₹5 lakh crore market, there is significant headroom for growth for Titan, the brokerage said.
Motilal will watch the near-term consumption trend, but will continue to like Titan for its best-in-class execution track record and its hunger to keep expanding the user base. "Consumers' preference towards branded jewelers will continue to keep the category growth rate at an attractive level," it said while reiterating its 'Buy' call with a target of ₹4,200.
Nuvama Institutional Equites sees risks to earnings mainly from the jewellery margin trends but has retained a 'Buy' on the stock with a target of ₹4,106.
"Titan's 5-year historic average multiple has been 60 times, which was our assigned range earlier. To factor the potential international expansion, we increase our target multiple to 65 times as immediate earning impact will be miniscule. We also separately value Caratlane at ₹18,300 crore," Nuvama said.
In an interview with CNBC-TV18 Ashok Sonthalia, CFO, Titan said, “On margin side, in jewellery particularly the studded ratio was lower compared to last year. And there was some softness on the very high value solitaires and the sub-50k, or sub-100k kind of diamond jewellery market. Q4 is activation period for us. And we will wait to see the results of Q4 pans out as far as studded jewellery is concerned.”
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