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Titan stock under pressure, plunges to 4-month low; slips 21% in July

Despite near-term weakness, JP Morgan believes the structural market share gain-led growth strategy for Titan remains intact and would ensure healthy medium-term growth prospects.

SI Reporter  |  Mumbai 

Titan

Shares of continued to reel under pressure, slipping 5 per cent intra-day to hit a four-month low of Rs 1,057 on the BSE on Thursday. Concerns of lower jewellery sales growth due to weak consumption trend dampened investors' sentiment. The stock was trading at its lowest level since March 3, 2019.

Thus far in July, the stock has underperformed the market by falling 21 per cent from the level of Rs 1,335 per share. In comparison, the benchmark S&P BSE Sensex has slipped1 per cent during the same period. The stock, however, hit an all-time high of Rs 1,341 on July 1, during the intra-day trade.

"April-June quarter (Q1FY20) witnessed a tough macro-economic environment with consumption taking a hit. Very high gold prices, particularly in June, also impacted growth in the jewellery industry. Against this background, the company's growth, particularly, in the Jewellery segment was lower than planned even though the gains in market share were sustained," the company said in a quarterly update on July 8.

Reliance Securities expects the company to report a total revenue growth of 15 per cent year on year (YoY) in Q1FY20 against its previous expectations of 24 per cent in the quarter.

"The slowdown in revenue is mainly due to jewellery segment which reported muted revenue growth of 13 per cent YoY," analysts at the brokerage firm said.

This lower-than-planned growth poses downside risk to revenue and earnings growth forecasts for FY20E, said analysts at JP Morgan whose initial assessment suggest around 3-5 per cent downside to FY20E EPS (earnings per share).

Negative reaction to the share price on account of the subdued print and high valuations dragged an otherwise shining stock. Titan's stock was up 44 per cent in first six months (January-June) of the calendar year 2019 as against a 9 per cent rise in the benchmark S&P BSE Sensex during the period.

Despite near-term weakness, the brokerage firm believes the structural market share gain-led growth strategy for Titan remains intact and would ensure healthy medium-term growth prospects.

At 02:53 pm, Titan was trading 2 per cent lower at Rs 1,082 on the BSE, against a 0.45 per cent decline in the S&P BSE Sensex. A combined 3 million shares had changed hands on the counter on the BSE and NSE, till the time of writing this report.

First Published: Thu, July 18 2019. 14:55 IST
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