Titan share price falls over 4% after Q4 results; should you buy, sell, or hold the stock?

Titan Company Q4 result

After market hours on Friday, May 3, Titan reported a 5 per cent year-on-year (YoY) rise in consolidated net profit of ₹771 crore for the quarter that ended on March 31, 2024. Total income for the quarter rose 22 per cent YoY to ₹11,472 crore.

The company’s EBIT for the quarter grew by 10 per cent YoY to nearly ₹1,192 crore.

The Jewellery segment’s total quarterly income grew 19 per cent YoY to nearly ₹8,998 crore, while ‘Watches & Wearables’ total income for the quarter stood at ₹940 crore, up 8 per cent YoY.

Also Read: Titan Results Updates: Net profit rises 7% YoY to ₹786 crore, declares dividend of ₹11 per share

Titan share price movement

By jumping nearly 29 per cent, Titan shares have outperformed the equity benchmark Sensex over the last year, which has gained about 21 per cent in the same period.

Titan Company share price hit its 52-week high of ₹3,885 on the BSE on January 30 this year. Its 52-week low level is ₹2,666.55, which it hit on May 5 last year. For the current calendar year, till May 3 close, Titan share price is down about 4 per cent.

Also Read: Can Titan retain its sparkle amid rising gold prices, competition?

Should you buy, sell, or hold the stock?

Top brokerage firms have retained their previous recommendation on Titan stock, but some have trimmed their estimates due to gold inflation and the stock’s fair valuation. Let’s take a look at what some of them say:

Motilal Oswal Financial Services

Motilal maintained a buy call on Titan stock with a target price of ₹4,100. It said Titan remains its top consumer discretionary play in India. However, the brokerage firm cut its earnings per share (EPS) estimates by 6 per cent and 5 per cent for FY25E and FY26E, respectively.

The brokerage firm believes the near-term growth outlook of Titan appears subdued due to high gold inflation affecting demand sentiments. This, however, is a typical trend during inflationary periods.

“Despite the near-term jitteriness, the company remains aggressive in its growth outlook, driven by new store additions, attractive designs, and market share gains, et al. Titan also maintains a Jewelry EBIT margin of 12-13 per cent for FY25. We will monitor the near-term consumption trend,” Motilal said.

Motilal underscored that Titan is on track to achieve the existing jewellery revenue guidance of 2.5 times FY22 revenue by FY27, implying an impressive 20 per cent CAGR during the period.

The brokerage firm believes with a current market share of nearly 8 per cent in a sizable nearly ₹5 lakh crore market, there is significant headroom for growth for Titan.

Also Read: Stocks to buy: Dr Reddy’s Lab, Cipla among 9 stocks that can rise 6-15% in next 3-4 weeks; do you own any?

Kotak Institutional Equities

Kotak has an add call on Titan stock with a revised fair value of ₹3,600 from ₹3,750 earlier. It has trimmed the FY25/26E consolidated jewelry EBIT margin estimate by 90-110 bps and cut EPS estimates by 5-8 per cent.

“We raise FY25-26E jewellery sales growth by 2 per cent and reduce jewellery EBIT margin by 90-110 bps; net result: 5-8 per cent EPS cut. We estimate a 17 per cent consolidated jewellery sales CAGR over FY2024-27E, led by (1) a 15 per cent domestic CAGR on nearly 9 per cent store CAGR, (2) a 70 per cent CAGR in international business and (3) a 30 per cent CAGR in Caratlane,” said Kotak.

“We value Titan at 60 times June 2026E PE (price-to-earnings ratio). The stock is priced for perfection; we would keep an eye on the adoption of lab-grown diamonds in India (and Titan’s studded share) and Aditya’s Birla Group’s upcoming jewellery foray,” Kotak added.

JM Financial

JM Financial maintained its buy call on the stock but cut the target price to ₹3,825 from ₹3,940, citing Titan’s March-quarter earnings were below expectations.

“Revenue was inline, but lower margin across segments (weaker gross margin in jewellery and the lack of operating leverage in other segments) drove an overall nearly 3 per cent miss on segment profits. The performance of the watches and eyewear segments has been volatile, and more work is needed before it reaches a steady state,” JM Financial said.

The brokerage firm believes growth and margin will likely be impacted in the near term due to volatility in gold prices, elections and lower wedding dates.

However, JM Financial pointed out that for the full year, Titan will target maintaining its jewellery division growth momentum and it reiterated 12-13 per cent margin guidance.

Also Read: Titan had just 3 CEOs in 40 years. Who will be the fourth?

“Titan stock could react negatively to weak Q4 results and near-term demand issues. From the long-term perspective, considering a large opportunity size and Titan’s superior execution capabilities, headroom for growth remains strong,” said JM Financial.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 06 May 2024, 09:22 AM IST