Titan Company share slips 3% post Q3 earnings; here's what brokerages say

Titan share falls over 2% after Q3 net profit falls 11% Share of Titan Company fell over 3% today despite the firm reporting Q3 earnings that met expectations. The Tata group firm reported a 11.81% rise in consolidated net profit to  Rs 530 crore in Q3 led by income growth in the jewellery division.

Titan Company stock fell up to 3.28% to  Rs 1,512.1 against previous close of Rs 1,563 on BSE. The stock opened lower at Rs 1,554.50 today. Market cap of the luxury goods firm fell to Rs 1.34 lakh crore. The stock has fallen after 3 days of gain.

The large cap share trades higher than 20 day, 50 day, 100 day and 200 day moving averages but lower than 5 day moving averages. The share has gained 19.32% in one year but fallen 3.25% since the beginning of this year.

In Q3 of previous fiscal, the company posted a net profit of  Rs 474 crore. Total income during the quarter stood at  Rs 7,659 crore, up 16.93% as against a total income of  Rs 6,550 crore in the year-ago period.

"Titan Company reported a return to year on year growth in sales in Q3 of FY 2020-21 led by an impressive festive season recovery in the jewellery division," the company said.

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Titan's jewellery division recorded an income of Rs 6,249 crore for the quarter (excluding gold bullion sales) as compared to  Rs 5,409 crore last year, a growth of 16%.

The watches and wearables business in the quarter stood at Rs 550 crore against  Rs 625 crore in the previous year, a decline of 12%.

The eyewear business saw revenues declining by 7% in the quarter to Rs 124 crore against  Rs 133 crore in the year-ago period.

Brokerage Motilal Oswal retained its Buy rating (upgraded in Aug'20) on the stock given the healthy growth outlook and attractive opportunity as highlighted in its CEO meet note.

"Titan reported a largely in line set of 3QFY21 earnings. The management commentary continues to remain strong on near and longer term growth prospects in the Jewelry business. Commentary on Jan'21 retail sales growth as well as management outlook on its components like wedding/studded sales growth is encouraging as is the recovery in Watches and Eyewear businesses," the brokerage said.

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"While valuations of 67.9x/52.2x FY22E/FY23E EPS appear expensive, the long runway for profitable growth deserves premium multiples. Near term valuations appear expensive because of the impact of COVID-19 in FY21. Maintain Buy with a target price of Rs 1,800/share (60x FY23E EPS)," the brokerage added.

Edelweiss in a note said, "Given  the  strong  recovery,  positive  turnaround  in  eyewear and expectations of secular growth over the coming quarters, we are revising up the target to 55x (from 45x) FY22E EV/EBITDA, which yields a target of Rs 1,842. Maintain 'BUY'."

Amarjeet Maurya - AVP - Mid Caps at Angel Broking said, "For 3QFY2021, Titan Company's net sales grew 17% to Rs 7,659 crore led by an impressive festive season recovery in the jewellery division. Jewellery business grew 16% (excluding gold bullion sales) over the corresponding quarter of the previous year, the Watches and Wearables and Eyewear divisions also did well with the recovery rate for the quarter being 88% and 93% respectively. On the EBITDA front, the company reported margin contraction (down by 50bp YoY to 11.1%), primarily on account of higher operating cost. Overall results were in line with expectations. We have a neutral view on stock."