Titan stock up 4% despite 10% fall in Q3 profit; here’s why

The shares of watch-to-jewellery major Titan Company surged 5.1% to its intra-day high of ₹2,424.50 on Friday, despite the company reporting a 10% fall in its October-December profit at ₹913 crore on a rise in expenses in the quarter. The rise in the stock price can be attributed to strong underlying demand trends across divisions.

The country's largest branded jewellery maker's revenue, however, rose 15.8% on a year-on-year basis to ₹11,698 crore against ₹10,094 crore in the year-ago period.

The stock of the Tanishq brand owner opened a gap-up at ₹2,315.05 today and is currently trading 3.84% up at ₹2,393.50. The Titan Company stock has risen 2.96% in the past week, though its one-month and six-month fall stand at 8.75% and 1.44%, respectively. The stock has declined 7.06% in the year-to-date so far.

During the quarter under review, the consolidated EBIT stood at ₹1,324 crore, with margins at 11.6%. The jewellery business posted ₹9,518 crore in revenue, a 9% growth as compared to the same period last year, backed by healthy consumer demand during the festive season. The EBIT in the jewellery category stood at ₹1,236 crore, clocking a 13% margin. A total of 22 stores (excluding Caratlane) were added during the quarter, taking the total jewellery store count to 510 across 247 cities, the company said.

"The quarter witnessed a strong festive consumer demand and we delivered a healthy double-digit growth of 12% over a strong base of Q3FY22. We continue to pursue market share growth and are actively investing in capabilities across all of our business segments. Our international endeavour is shaping well and we are quite satisfied with the consumer response we are getting in the chosen international markets," says C.K. Venkataraman, managing director, Titan Company.

The company said the 'watches & wearables' category recorded a total income of ₹811 crore, exhibiting a "multi-fold growth" over the same period last year. A total of 48 stores were added during the quarter, says the company. This took the total watches and wearables store count to 953 spread across 293 cities.

In the eyecare vertical, the company recorded an income of ₹174 crore, which grew by 12% as compared to Q3FY22. The business reported an EBIT of ₹32 crore, clocking an margin of 18.4%. In emerging businesses, Titan's income of ₹89 crore grew by 150% over the same period last year.

Despite a fall in its profit on a YoY basis, key brokerages like Sharekhan, Prabhudas Lilladher, and CLSA have given a 'buy' call on the Titan stock, with the revised price target in the range of ₹2,905- ₹3,000. “We upgrade the stock to BUY and increase our FY23/FY24/FY25 EPS estimates by 1.5%/2.0%/2.0% and target price to Rs2905 (Rs2875 earlier) given strong underlying demand trends across divisions in Jan23 and ~17% correction from the peak,” says Prabhudas Lilladher. Morgan Stanley, however, has kept the 'overweight' rating on the stock, with a target price of ₹3,030 a piece.