Target: ₹3,730
CMP: ₹3,374.20
Titan’s Jun-Q earnings were above expectations. Revenue was already known from the prequarter update; however, EBIT was ahead of our forecasts primarily on account of better than expected Jewellery division margins. Contrary to ours and street expectation of margin compression due to weaker sales and mix, the division margin expanded by 20bps led by stable GM & tighter cost control.
Given the multiple challenges (higher gold prices, lower wedding dates) in the quarter, margin delivery was quite impressive, in our view. Another key highlight was 16 per cent LTL growth in South which was better than key competitor in that region, while in North growth was lower at 9 per cent, impacted by faster expansion by regional players.
The management believes market shares on overall basis were largely stable. On the recent custom duty reduction, while it’s too early to comment, management believes some cooling off in gold prices does improve consumer sentiment; but need to be watchful of adverse geopolitical events.
Competitive intensity remains elevated and will entail higher brand investments; however, management continues to maintain its 12 per cent margin guidance (adj for duty cut led exceptional impact of ₹500 crore) for Jewellery division.
Considering large opportunity size, sharp corrections should be used as opportunity to add, in our view