Target: ₹4,030
CMP: ₹3,281.65
Titan’s jewellery margin missed our estimate. While the FY25 target of 20 per cent jewellery revenue growth and 12-13 per cent EBIT margin was retained, the management’s tone was slightly cautious. The spike in gold prices temporarily benefits competitors that typically do not hedge.
Also read:Broker’s call: Star Health Insurance (Buy)Watches margin was impacted by inferior mix with rising share of wearables. Caratlane revenue increased by 29 per cent y-o-y slightly lower compared to 32 per cent y-o-y in Q3FY24.
In the past, Titan has mentioned that lab-grown diamonds are not a threat. This time, the management said that while it is not having any impact yet, the company is watchful. Titan’s $20 million investment in a US company, specialising in lab-grown diamonds, has not done well. Hence, Titan has taken a 30 per cent impairment charge on the investment.
Titan will prioritise growth over margins and H1-FY25 margins are likely to be under pressure. We have lowered our margin assumption from 12.8 per cent to 12.1 per cent in FY25 and expect a recovery to 12.4 per cent in FY26. We mostly retain our sales growth estimates but cut our margin estimates, resulting in 6-7 per cent cuts in FY25-26 EPS.
Despite near-term weakness, we expect 20 per cent earnings CAGR over FY24-26 for Titan. Retain O/P.
