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Analysts said the impact of custom duty cut while benefited the jewellery growth, weighed negatively on reported margins; Should you invest?
Titan Share Price Today
Titan shares fell up to 3 per cent to Rs 3.133 on Wednesday a day after the company reported that its consolidated profit for the quarter ended September 2024 fell 23.1 per cent to Rs 704 crore year-on-year (YoY) mainly due to impact of customs duty reduction.
During the quarter, Titan’s total income rose 26 per cent YoY to Rs 13,660 crore.
Analysts said the impact of the custom duty cut while benefiting the jewellery growth, weighed negatively on reported margins, with adjusted also weak due to inferior product mix (lower studded). Following its Q2 results, Titan’s target prices was cut by at least two foreign brokerages.
“Overall 2Q while met our muted expectation, was still lower than consensus. The management commentary on demand was reasonably positive although cut in jewellery margin guidance would be viewed negatively partially due to weak demand for solitaire. We cut EPS by 3-7 per cent and retain HOLD,” Jefferies said.
This brokerage cut its target price for Titan to Rs 3,400 from Rs 3,600 earlier.
Goldman Sachs has lowered its FY25 EPS estimates by 8.7 per cent to build in the lower than expected margins and the full impact of the one-off loss in jewellery. It now builds in an adjusted jewellery EBIT margin of 11 per cent against 12 per cent earlier in FY25. It also lowered its FY26/27 EPS estimates by 3.5 per cent/1.9 per cent to build in lower jewellery margins from higher competitive intensity, building in 11.5 per cent EBIT margin for FY26/27 in jewellery against 12 per cent earlier.
“Our target price declines to Rs 3,650 from Rs 3,750 prior, as we roll forward based on Q5 to Q8 EPS. We maintain our Buy rating,” Goldman Sachs said.
Jefferies said concerns on moderating urban consumption trends along with elevated competition in jewellery and weaker product mix (partially due to LGD) would likely keep the Titan Company share price range-bound.
The Titan Company management has guided for a one-time loss of Rs 550 crore which will be spread out over 2 quarters, of which Rs 290 crore was reported in Q2FY25. The reason for this impact is that while Titan keeps its entire gold inventory hedged, one of the mechanisms to hedge gold, which is gold on lease taken from banks, does not cover for changes in the import duty structure.
“Titan has ~40 per cent of its gold inventory hedged through gold on lease from banks. Hence, the sharp decline in the gold price in India driven by the cut in import duty is likely to result in a one-off hit to margins to the extent of the gold on lease on the balance sheet. There is no likely impact on FY26 or FY27 profits for Titan from this issue,” Goldman Sachs said.
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