Weak sentiment, gold price volatility take sheen off Titan Company

Most brokerages are positive on the long term prospects of the stock

The stock of India’s largest jewellery maker Titan Company was down 3.2 per cent in trade on Thursday after its March quarter sales growth figures disappointed the Street. Given the slowing growth across its segments in Q4 and near-term worries, brokerages have cut their earnings estimates for FY22/FY23.

Sales of the company’s jewellery segment were down 4 per cent YoY from expectations of 15 per cent growth. The company indicated that there were disruptions during the quarter including the partial lockdown due to the Omicron wave in January followed by the weak consumer sentiment. The latter was due to sharp increase and volatility in gold prices and uncertainty due to a fragile geopolitical situation. Adjusted for the higher base including a large business to business order, jewellery sales in the quarter was flat as compared to the year ago quarter. The three year annual growth now stands at 15 per cent post March quarter numbers as compared to 21 per cent at the end of the December quarter.

Though there are positives such as stability in gold price, healthy wedding demand and lower chance of a disruption due to a further Covid wave, Motilal Oswal Research expects some residual impact of the above in June quarter as well.

The positive amid a soft quarter is market share gains for the leader. Say Amnish Aggarwal and Aashi Rara of Prabhudas Lilladher Research, “Our channel check suggests that industry sales were down by 50-60 per cent sequentially and Tanishq has gained share given structural tailwinds.”

The brokerage expects the jewellery business to sustain strong margins due to inventory gains in diamonds in March and June quarters. Diamond prices have jumped by 40 per cent over the last couple of months and prices are expected to remain firm given supply issues from Russia.

The watches and eyewear segments also disappointed in the quarter with growth of 5-12 per cent as compared to 15-34 per cent that brokerages were working with. Analysts at Kotak Securities say that the modest growth in eyewear despite a 19 per cent growth in stores is surprising. In addition to the performance of smaller segments, analysts will keep an eye on the response to new offerings such as headphones and Truly Wireless earphones.

While brokerages are positive on the long term prospects, investors should await better entry points for the stock which is trading at just under 59 times its FY24 earnings.