Titan share price gains as analysts raise target price after Q3 results; Should you buy the stock?

Titan share price gained over 2% in early trade on Friday as brokerages raised target price on the stock after the company reported its Q3 results.

Titan Company posted a net profit growth of 9.4% YoY at ₹1,040 crore in the third quarter of FY24. The company’s revenue from operations in Q3FY24 increased 20% to ₹13,052 crore from ₹10,875 crore, YoY.

EBITDA during the quarter ended December 2023 rose 9.5% YoY to ₹1,457 crore, while EBITDA margin contracted by 100 basis points (bps) to 11.2% from 12.2%, YoY.

Jewellery segment’s total Income for the quarter grew 23% over Q3FY23 to ₹11, 709 crore, while the segment’s EBIT was at ₹1,432 crore with a margin of 12.2% for the quarter.

Read here: Titan Q3 Results: Net profit rises 9% to ₹1,040 crore; revenue grows 20% YoY

During the quarter, jewelry sales were impacted by Shradh month in October and a slowdown in December due to an increase in gold prices. However, the company’s management is confident of reporting better growth in 4QFY24 compared to 3QFY24, as January 2024 has witnessed recovery in jewelry performance. 

Titan's Q3 margins missed most brokerages' estimates, but analysts remain optimistic about the company over the medium to long term led by strong demand across business and international expansion. Analysts also raised target price on the stock. Here's what brokerages said on Titan Q3 results and Titan shares:

Nuvama Institutional Equities

Titan posted an 11% miss in consensus earnings driven by weaker margins in Jewellery and Watches & Wearables. Jewellery margin miss was due to lower studded ratio, higher competitive intensity given gold price spike and marketing investments. There was no major impact of diamond prices on margins, Nuvama Institutional Equities noted.

While there is a divergence in performance across Titan’s segments, it highlighted that January Jewellery demand stayed strong. 

“Titan’s 5Y historic average multiple has been 60x, which was our assigned range earlier. To factor the potential international expansion, we increase our target multiple to 65x as immediate earning impact will be miniscule,” said Nuvama Institutional Equities.

The brokerage firm sees risks to earnings mainly from jewellery margin trends. It retained a ‘Buy’ rating on the stock and raised the target price to ₹4,106 per share from ₹3,795 earlier.

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Antique Stock Broking

Titan’s Q3FY24 profitability was marginally below Antique Stock Broking estimates, largely due to a contraction in the jewelry margin. Jewelry EBIT margin contracted by 46 bps YoY to 12.1% due to a drop in the contribution of studded jewelry, higher promotions, and marketing spends.

“Overall, we remain optimistic about the company over the medium to long term. We understand that structurally it is moving in the right direction of targeting jewelry sales of ₹600 billion by FY27 and gaining market share across geographies (including the South),” said Antique Stock Broking.

Post Q3FY24 performance, the brokerage cut its FY24 estimates by 8% factoring lower profitability while broadly maintaining FY25/ FY26 estimates. It maintained a ‘Buy’ recommendation and raised the target price to ₹4,100 from ₹4,092 earlier.

Motilal Oswal Financial Services

The gradual recovery in the studded ratio is expected to support improved gross margin in the future. Its healthy growth outlook, favorable industry trends, and strong balance sheet make it a compelling option in the discretionary sector, Motilal Oswal Financial Services said. 

It believes there is significant headroom for growth and models a 15% revenue CAGR with an EBITDA margin of 11-12% during FY24- FY26E. 

“In a slower consumption environment, the Jewelry category growth is still outperforming. We will watch the near-term consumption trend, but will continue to like Titan for its best-in-class execution track record and its hunger to keep expanding the user base. Consumers’ preference towards branded Jewelers will continue to keep the category growth rate at an attractive level,” said the brokerage firm. 

It reiterated a ‘Buy’ rating with a target price of ₹4,200 per share and continues to maintain Titan as its top consumer discretionary play in India.

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Centrum Broking 

Centrum Broking remains upbeat on Titan’s operating performance led by strong demand across business segments yet its footing in the international market appears to be promising.

“We reckon Titan’s strategy revolving around serving millennials, meeting their aspirational demand with introduction of new designs and channels, yet rising share of wedding jewelry could pay richly. Further with rising interest rates and industry formalization showing up in market share gains for Titan. The turnaround in the Caratlane, watches, and eyewear divisions and continuity in their profitability potential need to be watched,” said Centrum Broking.

With a stable margin outlook, it increased FY24E and FY25E earnings by 1.0% and 9.9%. It retained a ‘Buy’ call and raised the target price to ₹4,255 per share from ₹3,780 earlier. 

At 9:25 am, Titan Company shares were trading 1.03% higher at ₹3,663.30 apiece on the BSE.

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