Titan Company down 3% as jewelry sector crawls in Q4 amid rising gold prices

Shares of Titan Company fell 2.8% to Rs 2,468 apiece on BSE on Thursday after the company reported slow growth in its jewelry business in the March quarter of FY22 (Q4FY22) .

At 10:45 a.m., shares of the Tata Group company were trading at Rs 2,479, down 2.5%, on BSE. By comparison, the BSE Sensex was 59,163, down 0.75%.

The company’s Jewelery division ended the volatile quarter on a flat note on a strong footing in Q4FY21. Business saw subdued activity in major cities due to the Omicron wave on January 22, a very strong resurgence in February and again a drop in customer purchases in March due to the sharp rise in gold prices and the impact on sentiment due to the outer wave. political conflict.

“While walk-in visits were down slightly, customer conversions and ticket sizes were up slightly for the quarter compared to the same period last year. Top 8 cities sales increased to single digits while the rest of India saw a slight decline.Although the plain Jewelery category felt the brunt of gold volatility in March 2022, leading to a slight decline for the quarter, sales studded delivered high single-digit growth, partially cushioning the impact,” Titan said in its press release.

“Titan’s recurring jewelry sales (excluding bullion/B2B sales) were flat year-on-year at around Rs 6,000 crore in the fourth quarter against high street expectations of 15-16% growth. This implies a 3-year CAGR deceleration to 15 percent in the fourth quarter from 22 percent in the third quarter Although we expect demand to pick up in the first quarter of FY23, our revenue assumption for the jewelry business of Titan now implies 21% / 18% YoY growth in fiscal year 2023E / 24E There is downside risk of around 1- 3 percentage points to our revenue growth expectations for the financial year 2023-24E,” said analysts at Kotak Institutional Equities. They have an “ADD” rating on the stock with a target price of Rs 2,525.

Meanwhile, the Watches/Eyewear segments were up 12%/5% YoY versus market expectations of 15%/34%. Ethnic clothing brand “Taneira” opened two more stores, expanding its presence to eight cities and bringing the total number of stores to 20.

“Titan has been among the biggest beneficiaries of the move from an unorganized to an organized segment in the jewelry industry. Given its brand weight, as well as the confidence that the Tata name evokes, the “company has managed to outpace other major jewelers. We expect this market-sharing trend of gains to continue, driving its growth over several decades. Additionally, the company is currently present in only approximately 220 cities and has for goal to expand its presence to more than 500 over the next five years,” said a report from Edelweiss Securities.

The brokerage added: Although the performance was below trend, it was attributable to one-off factors with underlying structural growth unchanged. We believe that any correction in the stock will be a buying opportunity.

The brokerage maintains its EV/EBITDA target at 65x (EBITDA FY23E) with an unchanged target price of Rs 3,065 and a “BUY” rating.

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