Titan share falls: Buy or Sell Rakesh Jhunjhunwala’s favourite stock post Q2 results?

Titan Company share price plunged over 5 per cent to Rs 1,187 apiece on a 37.81 per cent on-year decline in its standalone net profit to Rs 199 crore for the quarter ended September 30. The company had reported a net profit of Rs 320 crore in the corresponding period of the preceding fiscal. Titan’s jewellery segment witnessed 98 per cent recovery. Research and brokerage firm Motilal Oswal Financial Services said that the first 10 days of the festive season, even when compared to the corresponding (non-COVID) period last year, shows single-digit YoY growth. The brokerage firm has a ‘buy’ rating to Rakesh Jhunjhunwala’s favourite stock with a 15 per cent potential upside on faster-than-expected sales recovery and attractive structural opportunity.

Titan Company’s total income for the quarter was Rs 4,389 crore, down 1.72 per cent as against Rs 4,466 crore in the corresponding quarter in the previous year. Titan’s total expenses during the quarter were at Rs 4,151 crore as against Rs 4,037 crore a year ago. Analysts at Axis Capital have upgraded the stock a notch to reduce from sell. It has pegged a target price of Rs 1,100, implying a 10 per cent upside from the previous close. 

Titan Company reported an 89 per cent recovery in sales in the second quarter of the current fiscal led by a sharp recovery in the jewellery division after the significant disruption caused by the COVID-19 pandemic in India in the first quarter of the fiscal. Axis Capital in its report noted that operational performance disappointed which was dragged by adverse mix in jewellery (lower studded/higher gold coin sales) which led to sharp gross margin erosion partly negated by A&P/cost cuts. 

Analysts at YES Securities said that Titan Company is witnessing marginal growth in the ongoing festive season but uncertainty remains as the company is trying to advance Diwali/Dhanteras sales to manage crowds better. The stock is currently trading at 47x FY23E earnings, which leaves little room for further upsides in the near‐term. The brokerage further added that while market share gains in jewellery and margin turnaround in other divisions remains medium‐term positives, near‐term risk of jewellery demand trends sustaining beyond the festive season coupled with margin headwinds are key issues. “We expect the stock to keep consolidating with a negative bias for now, till we get more clarity on demand trends post the festive period,” YES Securities said.

Key takeaways from Q2 earnings

• Titan’s jewellery division posted an income of Rs 3,446 crore in the July-September quarter, compared with Rs 3,528 crore in the year-ago period, a fall of 2 per cent. 
• Titan’s watches and wearables business recorded an on-year fall of 44 per cent in income to Rs 400 crore against Rs 719 crore.
• The company’s eyewear business revenues plunged 39 per cent in the quarter ended September 2020,  to Rs 94 crore, against Rs 154 crore last year.
• The company’s other segments, comprising Indian dress wear and accessories, reported an income of Rs 23 crore as compared to Rs 44 crore in the previous year, a decline of 48 per cent.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)