Buy, sell or hold: How to play the Titan Company stock post 14% fall intra day

Titan Company share price came under pressure today after the consumer durables firm said it faced a tough macro-economic environment with consumption taking a hit in the first quarter of this fiscal. The fall comes ahead of India Inc starting its earnings seasons for Q1 with IT behemoth TCS set to announce its earnings later today.

The company's quarterly update which shows high gold prices in June hitting growth in its jewellery segment signals lowering of expectations from the luxury goods maker when it will announce earnings for the quarter ended June this fiscal.

Titan Company share price fell up to 14.37% to 1,072.60 level compared to the previous close of 1,252 on BSE. Titan Company share price is likely to be adversely affected in the future too after Finance Minister Nirmala Sitharaman made provisions to raise import duty on gold and precious metals to 12.5 per cent, from current level of 10 per cent in her maiden Budget speech on July 5.

The hike in import duty is likely to make gold costlier. This is a huge negative for listed companies dealing in jewellery.

Also read: Why investors lost over Rs 15,000 crore in Titan Company stock today

The share price will also be affected by Q1 earnings in the current fiscal. Here's a look at what brokerages have to say on the movement and target for Titan share price in future.

Rahul Agarwal from Wealth Discovery said, "Titan Company shares plunged 14 percent intraday to touch Rs 1,073 (NSE) on July 9 which is also the biggest single day intraday fall in last 11 years, after the company reported a slowdown in its jewellery business in June quarter. Jewellery business contributes 82 percent of Titan's revenue and higher gold prices may lead to muted demand in an already weak market scenario. The other two divisions namely the watches and the eyewear segment continue to show robust growth. We believe that higher gold prices would impact the demand to some extent but Indian consumers do have a special penchant for gold not just for cultural reasons but also for saving purposes. Titan has been a market leader in the jewellery business and its leadership position would continue that way.

For investors exiting at this point is not advisable instead any deep correction in the stock should be treated as an opportunity to buy. For investors on the sidelines planning to buy the stock, they can start buying the stock in small steps. For traders, they can get out of the stock at each rally only to buy it back at a lower price."

Romesh Tiwari, head of research at CapitalAim said, "For the short term, traders must exit from the long position on Titan at any rise after such sharp sell-off. In short to medium term, this stock can fall more and may trade around 900 levels. It is fundamentally sound stock with good market share but the valuations are still higher given the current market scenario and effect of budget declaration about the increase in import duty on gold. Investors can buy it for the long term if it consolidates below 900 levels." 

Naveen Kulkarni, Head of Research at Reliance Securities said, "Titan had bucked the trend of slowdown in consumer sector with strong growth in the previous quarter. Indications for April were good, but the sharp slowdown in the first quarter of FY20 due to bad June sales have surprised the market negatively. Consensus estimates have seen significant earnings cut but more importantly there are challenges to the valuations considering Titan is an expensive stock. We have a hold recommendation on the stock."

Motilal Oswal Securities on Titan

Company management stated that growth, particularly in jewellery segment, was lower than planned in 1QFY20. Consequently, the brokerage has lowered earnings per share estimated by 2.7% and 1.8% for FY20/21. Maintain Buy position with revised target price of Rs 1,500.

Morgan Stanley on Titan

The brokerage said growth moderated in core jewellery business more sharply than their expectations. The reported growth likely implies flat- to low-single digit revenue growth in month of June with same-store sales decline.  Stock is expected to trade weaker in the near term. The brokerage has given a target price of Rs 1,300 on the stock.

Credit Suisse on Titan

The firm's stretched valuations and near term softness limit upside for the stock. The brokerage is positive on medium-term on the stock.  It has downgraded the stock to neutral with a target price of Rs 1,250. It has lowered earnings estimates by 2% and advised investors to look for a better entry point in the stock.

Edited by Aseem Thapliyal