Analysts say the jewellery segment’s performance for the quarter was way ahead of their estimates. They also see good prospects for the eyewear and the newly-introduced audio accessories segments, and retained or upgraded their targets on the stock post quarterly updates.
Prabhudas Lilladher has upgraded the stock to ‘accumulate’ from ‘hold’ with a new price target of Rs 1,663. It said an omni-channel strategy across jewellery, watches and eyewear segments will neutralise to some extent the impact of region-wise lockdowns and restrictions on operations.
Following the quarterly update, the brokerage expects Titan to log 100 per cent growth in Q4 profit at Rs 713.70 crore against Rs 356.80 crore reported for the year-ago quarter. Sales are seen rising 63.1 per cent to Rs 7,224.40 crore from Rs 4,428.80 crore. Ebitda margin is seen falling by 40 basis points to 13.20 per cent from 13.6 per cent YoY, but up from 11.8 per cent in December quarter.
“We expect 45 per cent volume growth in the jewellery segment on the back of a correction in gold prices, high demand of wedding jewellery and market share gains. While margins may taper off by 340 bps due to lower studded ratio and higher procurement costs before the custom duty increase. We expect a 12 per cent degrowth in watches. Watch out for commentary on operational stores and hours as well as demand scenarios due to lockdowns,” Prabhudas Lilladher said.
Titan suggested some impact on business momentum in the second half of March due to the emerging Covid situation.
Jhunjhunwala held 4.23 per cent stake in the Tata Group firm at the end of December quarter, while his better half owned another 1.09 per cent. Together, at Rs 7,273 crore, Titan is Jhunjhunwala’s biggest single stock holding.
Emkay Global said the growth in the company’s jewellery segment exceeded expectations and the momentum is likely to remain strong, driven by the wedding season ahead. “While Maharashtra, a key market accounting for 15-20 per cent of jewellery revenues, may see a short-term impact due to the lockdown, strong momentum in jewellery segment and pent-up demand would drive further upgrades to our forecast,” it said.
“The stock trades at 47 times FY23 EPS. Titan remains our preferred pick in the discretionary space,” the brokerage said and finding the stock worthy of a price at Rs 1,650 .
After falling for three consecutive days, the stock gained on Thursday and traded 2 per cent higher at Rs 1,603 in a flat market on Friday.
Emkay expects 87 per cent profit growth for Titan on a 59 per cent projected sales growth. “Excluding B2B sales, we forecast Ebitda growth of 60 per cent to Rs 940 crore and PAT growth of 81 per cent to Rs 650 crore,” it said.
Titan said e-commerce led the recovery in watches that clocked a recovery rate of about 90 per cent in the first two months of the quarter, though growth was flat compared with the same period last year. While eyewear division’s revenue grew 20 per cent during the quarter, accessories recorded a low recovery rate of about 50 per cent due to low walk-ins at malls and lack of demand for school and college bags, as most educational institutions remained shut due to the pandemic.
Motilal Oswal said Titan’s strong overall sales growth of 60 per cent YoY for the March quarter and 70 per cent YoY growth particularly for the jewellery segment were far ahead of its expectations of 39 per cent and 48 per cent expansion, respectively.
Titan’s penetration in the Tamil Nadu market – a stronghold of regional players – is a positive development, the brokerage said and suggested that the recent sharp correction in gold prices bodes well for consumer demand in the near term.
“While margins would be impacted in the March quarter, this is largely on account of one-off factors. The margin outlook is expected to improve, unless a second round of restrictions disrupts business once again,” it said and offered a price target of Rs 1,800 on the stock.
ICICI Securities said while the ratio of company’s studded jewellery has witnessed a healthy recovery on a sequential basis, it continues to remain below pre-Covid levels. Also, the higher share of gold coins in sales tends to drag overall margins, it said.
“Hence, we expect gross margins to decline 540 bps YoY to 25.1 per cent. Employee expenses are expected to increase by 19 per cent YoY. However, with positive operating leverage kicking in, we anticipate Ebitda margins to decline by 120 bps YoY to 11.8 per cent. On the back of a robust operational performance and high tax rate in the base quarter (nearly 33 per cent), we expect PAT to increase 69 per cent YoY to Rs 578 crore,” it said while suggesting a target of Rs 1,830.
