In the past eight trading days, the stock had underperformed the market by falling 6 per cent, as compared to a marginal 0.5 per cent decline in the benchmark index till Friday.
“Retail sales in jewellery were better than expected at the beginning of Q3FY20, possibly due to a good wedding season and reasonable inelasticity of wedding jewellery. The industry witnessed satisfactory growth in the festive season and the company performed better than industry, which led to market share gains,” Titan Company said in Q3FY20 update.
“However, the growth in watches and eyewear were difficult to come by. Sales in all divisions in the second half of December were also impacted to some extent due to forced store closures due to the protests in the North East and in many other parts of the country,” it said.
Titan said the Jewellery division met its revised expectations for the quarter with revenue growth at 11 per cent year-on-year (YoY). Retail growth was much better at 15 per cent YoY due to a large Rs 200 crore institutional order for gold coins in the base quarter.
Currently, Titan is expected to add around 50 stores for the year, primarily due to operational delays in roll out (and not because of change in plans to reduce the number of stores to be opened), it said.
“While Q3FY20 jewelry segment sales were in line with the revised 2HFY20 guidance, sales growth in smaller watches and eyewear were lower than expectations. There has been a marginal spike in gold prices over the last few days; if it sustains, it would be interesting to hear management’s post results commentary of its impact on demand,” brokerage firm Motilal Oswal Securities said in company update.
Post 2QFY20 results, we had downgraded the stock to Neutral as we believe that earnings growth over the next year is adequately captured in the current valuations (51.1x FY21E EPS of Rs 22.3). Longer-term topline and earnings opportunity remain attractive, the brokerage firm said.
At 09:37 am, the stock was trading 1.5 per cent higher at Rs 1,157 on the BSE, against 1.1 per cent decline in the Sensex. A combined 948,609 equity shares have changed hands on the NSE and BSE so far.