Titan’s stock took a sharp hit as the Tata Group firm reported sluggish growth in its jewellery business for the first quarter of FY25, leaving investors disappointed. The shares dropped by 3.46%, closing at Rs 3,156.15 apiece on the BSE. This marked the fifth consecutive trading session of losses for Titan, reflecting growing concerns over the company’s performance.
In its quarterly business update released on July 5, Titan reported a year-on-year growth of 9% in Q1FY25. However, its domestic jewellery operations showed only an 8% YoY growth, a modest increase influenced by weakened consumer demand attributed to higher gold prices and fewer wedding days. Titan noted that domestic growth mainly stemmed from an increase in average selling prices, while the growth in the number of buyers remained in the low single digits.
In contrast, Titan’s Watches & Wearables segment performed more robustly, with the domestic business expanding by 14% YoY. Analog watches experienced a healthy revenue growth of 17% YoY, although the Wearables segment saw a decline of 6% YoY. The EyeCare division’s domestic business posted a 3% YoY growth, benefiting from its entry into affordable fashion, which contributed to volume growth in this category.
During the June 2024 quarter, Titan expanded its retail network significantly, adding a net total of 61 stores and bringing its combined retail network to 3,096 stores. Despite this expansion, the overall performance in the jewellery segment remained a focal point of concern for investors and market analysts.
Goldman Sachs revised Titan’s target price downward from Rs 3,800 to Rs 3,700, citing maintenance concerns. The report highlighted that Titan’s Q1 revenue update was disappointing, with a sharper slowdown in jewellery sales than anticipated. Key competitors outperformed Titan during the same period, which raised further concerns among analysts. Additionally, Goldman Sachs predicted that Titan’s jewellery margins are likely to weaken, adding more challenges for the company in the near term.
Morgan Stanley, in its latest report on Titan, maintained an “equal weight” rating on the stock, setting a target price at Rs 3,526 per share. The report emphasized the slow single-digit growth in Q1 top-line figures, falling below expectations primarily due to the 8% growth in Titan’s Indian jewellery business, which was significantly lower than the anticipated 20%. Morgan Stanley suggested that under these conditions, Q1 jewellery margins are likely to disappoint compared to their target estimate of 11%.
In terms of stock performance over the past year, Titan has experienced a mixed bag of results. In the last month, the stock delivered negative returns of 8.17%, showcasing a modest downward movement. Over the past six months, the stock experienced negative returns of 15.20%, indicating a challenging period of decline. Year-to-date figures remained in negative territory, depicting a decline of -14.53%. However, over the last twelve months, the stock managed to maintain positive returns of 3.19%, highlighting its resilience in the longer term.
The recent performance and revised outlook from brokerage firms underscore the challenges Titan faces in its jewellery segment. The company’s efforts to expand its product offerings and retail network have been noteworthy, but the impact of higher gold prices and fewer wedding days on consumer demand has been significant. As Titan navigates these challenges, investors and analysts will closely monitor its performance in the coming quarters to gauge the effectiveness of its strategies and its ability to regain momentum in the jewellery market.
The recent dip in Titan’s stock price and the cautious stance from major brokerage firms highlight the need for the company to address the concerns around its jewellery segment. While the Watches & Wearables and EyeCare divisions show promise, the core jewellery business remains a critical area for improvement. Investors will be looking for stronger growth figures and better margin performance in the upcoming quarters to restore confidence in Titan’s long-term growth prospects.
