Titan plunges 10% on disappointing Q2 nos, cut in H2FY20 revenue guidance

Shares of Titan Company slipped 10 per cent to Rs 1,160 on the BSE in the early morning deals on Wednesday, a day after the company reported a disappointing set of numbers for September quarter (Q2FY2) due to higher gold prices and weakness in the overall consumption.

On a standalone basis, Tata Group's jewellery and watch company's operating revenue stood at Rs 4,435 crore and remained almost flat compared to Rs 4,407 crore in the year-ago quarter. Revenue growth during the quarter was lowest in the past 12 quarters. Earlier, in Q2FY17, the company had reported a negative growth of 2 per cent in net sales.

Profit before tax (PBT) stood at Rs 429 crore, down 3.7 per cent year-on-year (YoY) and net profit was up just 1.8 per cent YoY to Rs 320 crore.

Analysts on an average had expected profit of Rs 394 crore on revenue of Rs 4,787 crore for the quarter.

The management said revenue was impacted substantially by the decline in the revenues of the jewellery division due to a sudden spike in gold prices in June 2019. The flat top line and higher costs affect PBT growth and margin which, at 9.7 per cent, was lower by 40bps YoY.

Due to the lackluster performance and more than expected weakness in consumer sentiment, Titan lowered its H2FY20 (October 2019 to March 2020) revenue growth guidance sharply to 11-13 per cent from 20 per cent.

The stock today reported its sharpest intra-day fall in the past four months. On July 9, 2019, it plunged 14 per cent after the company in Q1FY20 update said its growth, particularly, in the jewellery segment was lower-than-planned due to very high gold prices particularly in June. With today’ fall, the market price of Titan slipped nearly 17 per cent from all-time high level of Rs 1,390, touched on October 25, 2019 in the intra-day deal.

However, analysts at Edelweiss Securities maintain ‘buy’ rating on Titan with the target price of Rs 1,407 per share.

“We envisage Titan to extend its industry beating revenue growth, rising share of studded, new launches and retail expansion. Margin expansion levers such as higher share of studded (jewellery), in-house frame manufacturing (eyewear), cost optimisation and operating leverage are in place,” the brokerage firm said in a result update note.

At 09:43 am, the stock was trading 8 per cent lower at Rs 1,183 on the BSE, as compared to a 0.32 per cent decline in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 6.4 million shares changing hands on the NSE and BSE so far.