The government’s decision to bring jewellery makers under the anti-money laundering law and a slow recovery after disruption caused by the Goods and Services Tax are expected to weigh on Titan Ltd.’s sales for the quarter ending September, brokerages said.
They maintained ratings for the owner of India’s largest jewellery retail chain.
Stores require KYC (identity and tax number disclosures) from customers buying gold worth more than Rs 50,000 after the government brought the sector under Prevention of Money Laundering Act last month.
Here’s what brokerages said about Titan.
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CLSA
- Stock Rating: Maintain ‘Buy’
- Target Price: Unchanged at Rs 700, a potential upside of 19.6 percent from Thursday’s close.
- Modest customer response to regulatory issues will likely weigh on Titan’s results for the July-September quarter.
- Market share gains continued in jewellery.
- Expect 5 percent revenue growth in jewellery; Titan remains preferred pick in the consumer space.
- Response to activation in watches was decent but below expectations
- Eyewear had good retail growth although reported sales may be muted as Titan compensated associates for a rise in GST rates without increasing prices.
- Expect 2 percent year-on-year growth in pre-ex earnings for the second quarter on the back of outstanding performance in the previous three months.
- View Titan as a strong play on a pick-up in discretionary consumption despite the near-term concerns.
- Titan also benefits from the government’s focus on formalising the economy.
JP Morgan
- Stock Rating: Maintain ‘Buy’
- Target Price: Unchanged at Rs 620, implying a potential upside of 5.9 percent from Thursday’s close.
- Growth moderates on account of GST and PMLA.
- Industry representations to relax the limit of Rs 50,000 given the price of gold are being made to the government.
- Restocking of the trade channel post GST-led disruption is largely completed, which should aid primary sales growth.
- Market share gains to continue.
- Store additions expected to pick up in the second half of 2017.
- For the watch business, growth in the second quarter was good, largely aided by exceptional sales through the online channel.
Motilal Oswal
- Stock Rating: Maintain ‘Neutral’
- Target Price: Hiked to Rs 590, a potential upside of 0.8 percent from Thursday’s close
- PMLA to affect sales for quarter ending September.
- Despite a slowdown jewellery, business gains market share.
- Watches witnessed good growth during the quarter, led by exceptional sales via the online channel and restocking by dealers.
- As the industry didn’t increase prices despite a higher GST rate at 28 percent, net sales growth for the quarter will remain muted.
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