Titan stock drops 4% on a poor Q1 business update and a downgrade by JPMorgan.

 

 

8/7/2024,

Low wedding days and high gold prices caused consumer demand to be muted, which in turn affected overall growth, Titan revealed in its Q1 business update.

Titan Company's stock saw a nearly 4% decline on July 8 when JPMorgan lowered it from an earlier "overweight" recommendation to "neutral" following the Tata Group company's release of its June quarter business update.

Additionally, the foreign brokerage lowered its target price for Titan from Rs 3,850 to Rs 3,450.

According to JPMorgan, Titan's jewellery division reported a 9% revenue rise in the June quarter, missing previously reduced projections. This follows eight quarters in a row where goals were met or surpassed.

 

Titan stated that low wedding days and high gold prices caused consumer demand to be muted, which in turn affected overall growth.

While there is a short-term impact on demand due to the high volatility of gold prices, JPMorgan analysts are more concerned about the moderating growth for studded jewellery given the growing consumer preference for gold and the escalating promotional activity, which could slow Titan's rate of acquiring new customers.

JPMorgan warned that Titan's margin profile would suffer if the conditions mentioned above continue. Titan's Earnings Per Share (EPS) projection for FY25–27 has been lowered by 5–6% as a result.

 

With a price target of Rs 4,045 on Titan, CLSA kept its "outperform" rating. A "rare soft result" might cause a downturn, but CLSA says this is an opportunity to "accumulate" because the brokerage anticipates growth, when gold prices return to normal and wedding season, rolls around again.

 

In the meantime, Titan's quarterly report was deemed "disappointing" by Goldman Sachs. With a price objective of Rs 3,700, the brokerage kept its "buy" recommendation on the stock, nevertheless.

 

The brokerage expressed concern over Titan's performance during the quarter, citing the competition's outperformance as a reason for concern and the likelihood of pressure on Titan's jewellery margins.

 

Titan may still meet its FY25 goal, according to Goldman, but it will probably be at the lower end of the range. Morgan Stanley, which kept an equal weight rating on the company and set a price objective of Rs 3,526, also predicted that Titan's jewellery margins would remain under pressure.

 

Also Read | Titan Q1 update: Business increase of 9% reported by the firm

 

Titan shares were down 4% at Rs 3,133.00 on the National Stock Exchange (NSE) at 10:00 a.m. The benchmark Nifty 50 index climbed almost 11% during this time, outpacing the stock's 14% decline thus far in 2024.