Titan Co.'s jewellery performance raises confidence in the company's FY24, according to most analysts, after the company's fourth-quarter revenue beat analysts' estimates while profit lagged street view.
"Its medium-term growth outlook remains good, supported by various initiatives to drive higher sales of wedding, studded, and fashion jewellery, a strengthening value proposition, and new customer acquisitions," JP Morgan said in a note.
But, some analysts also cut the company's FY24–25 earnings and target price due to weak watch and eyewear margins.
The Tata group company clocked a revenue of Rs 10,360 crore, an increase of 33% year-on-year in the March quarter, according to an exchange filing. Bloomberg estimated the company to clock revenue of Rs 9,322.18 crore. Meanwhile, net profit increased 40% year-on-year to Rs 736 crore, lower than the Bloomberg estimate of Rs 746.70 crore.
"We sensed a confident outlook on jewellery demand trends as well as on jewellery margin, though the need for growth investments, as well as growth led by low-margin wearables, raises concerns for us on watch segment margin," Macquarie Research said in its report.
Demand should hold up well over the coming quarters, albeit with some volatility, said CLSA.
Titan Q4 FY23 (Consolidated figures, YoY)
Revenue up 33% at Rs 10,360 crore (Bloomberg estimate: Rs 9,322.18 crore)
Ebitda up 37% at Rs 1,089 crore (Bloomberg estimate: Rs 1072.42 crore)
Ebitda margin at 10.5% Vs 10.2% (Bloomberg estimate: 11.5%)
Net profit up 40% at Rs 736 crore (Bloomberg estimate: Rs 746.70 crore)
The board has recommended a dividend of Rs 10 per share, to be paid on or after the seventh day from the conclusion of the 39th annual general meeting.
Shares of the company rose 0.62% to close at Rs 2,670.40 per share, compared to a 0.92% gain in the benchmark Nifty 50.
Of the 30 analysts tracking, 18 maintained 'buy', four suggested 'hold', while one analyst recommended 'sell', according to Cogencis data. Of the remaining seven, six kept a neutral stance between 'buy' and 'hold', while one remained neutral between 'hold' and 'sell'.
Here's what analysts said:
Macquarie Research
Maintains 'outperform' rating and cuts its 12-month price target by 2% to Rs 3,200, implying an upside of 20.2%.
Maintains 'outperform' rating on higher FY24 jewellery margin range guidance and the house's outlook of another quarter of resilient sales growth in jewellery.
Titan sounded positive on Q1 growth, given the recovery in late April.
Q4 jewellery performance raises confidence in FY24 assumptions.
Weak watch and eyewear margins drive a 2% cut to FY24/25 EPS and target price.
Peg continued demand strength in the jewellery segment as a catalyst.
Sees restructuring of franchisee payouts aligning the interests of both company and franchisee and aiding portfolio premiumisation.
marks an increase in competitive intensity as a key risk.
Jefferies
Maintains 'hold' rating on the stock.
India's jewellery growth of 21% was supported by buyer growth and higher bill values.
Segmental margins were a slight miss, partially due to lower gold rates.
Channel correction in eyewear and one-offs resulted in an Ebitda miss.
There was a pick-up in jewellery demand after a moderation in growth during March and early April.
Tweaks FY23–25 earnings by 1-2%.
Says Titan is a structural growth story but pegs valuations as lofty.
CLSA
Maintains 'buy' rating and raises the target price to Rs 3,210 from Rs 3,150.
Pegs comprehensive growth across segments with an optimistic outlook.
While there was some softness in demand in early April, the holiday season saw a bounce back, and the outlook for the coming quarters looks promising.
Titan's performance remains on track with all segments growing by healthy double digits, providing growth visibility.
Demand should hold up well over the coming quarters, albeit with some volatility.
With some inventory clean-up in 4Q, the eye-care business also started FY24 with strong growth momentum.
Strong show in other businesses that are scaling up rapidly.
Jewellery growth remains strong despite a soft March.
JP Morgan
Maintain 'overweight' on the stock with a price target of Rs 3,000 per share.
The company's operating performance was ahead of the house's expectations.
Management narrative on incremental jewellery demand and margin (FY24 target 12.5–13%) was positive compared to investor fears.
Expects Titan's outperformance to sustain, aided by steady revenue for its core portfolio and future growth options for emerging businesses.
Titan will benefit from a higher market share as jewellery purchases shift to organised players while the unorganised segment becomes less competitive.
It is uniquely positioned in terms of hefty headroom for market share-led revenue growth over the long term, strong competitive moats, a lower threat to profitability, and portfolio diversification opportunities.
Its medium-term growth outlook remains good, supported by various initiatives to drive higher sales of the wedding, studded, and fashion jewellery, a strengthening value proposition, and new customer acquisitions.
Watch Titan MD on Q4 earnings and the road ahead
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