Titan Stock Plummets 4% After JPMorgan Downgrade Following Weak Q1 Business Update

In a recent development, Titan Company’s stock price took a significant hit, plummeting 4% on July 8 after JPMorgan, a leading international brokerage firm, downgraded its rating from ‘overweight’ to ’neutral’. This drastic change in rating came after Titan shared its June quarter business update, which failed to meet expectations.

The company’s jewellery business witnessed a 9% revenue growth in the June quarter, which was lower than the already lowered expectations. The main reasons behind this sluggish growth were high gold prices and low wedding days, leading to subdued consumer demand. Titan attributed this decline to the impact of high gold price volatility on consumer demand, as well as the increasing preference for gold and promotional activities, which may hinder the pace of new customer acquisition.

JPMorgan analysts expressed concerns about the moderating growth of studded jewellery, citing the intensifying promotional activity and increasing consumer preference for gold. They also reduced Titan’s Earnings Per Share (EPS) estimate for FY25-27 by 5-6%. Furthermore, they warned that if these factors persist, Titan’s margin profile could be negatively affected.

On the other hand, CLSA, another brokerage firm, maintained its “outperform” rating on Titan with a price target of Rs 4,045. According to CLSA, any correction in the stock price due to a “rare soft result” should be seen as an opportunity to “accumulate”, as they expect growth to return when gold prices normalize and the wedding season arrives again.

Goldman Sachs also called Titan’s quarterly update “disappointing”, but maintained its “buy” recommendation on the stock with a price target of Rs 3,700. The brokerage expressed concerns about the competition outperforming Titan during the quarter, which may put pressure on its jewellery margins. Goldman believes that Titan can still achieve its guidance for FY25, but it may be at the lower end of the range.

Morgan Stanley echoed similar sentiments, maintaining an equalweight rating on the stock with a price target of Rs 3,526. At 10 am, Titan shares were trading 4% lower at Rs 3,133.00 on the National Stock Exchange (NSE). The stock has been underperforming the benchmark Nifty 50, which rose around 11% in 2024, with a decline of 14% so far this year.

It is essential for investors to consult certified experts before making any investment decisions.

Historical Context:

Titan Company Limited is an Indian multinational conglomerate with a diverse portfolio of businesses, including jewelry, watches, and eyewear. The company has a long history dating back to 1984, when it was founded by Atul Pittie. Over the years, Titan has expanded its operations and diversified its product offerings, becoming one of the largest jewelry companies in India. In recent years, the company has faced challenges due to factors such as high gold prices, intense competition, and changing consumer preferences.

In 2020, Titan’s jewelry business was severely impacted by the COVID-19 pandemic, leading to a significant decline in sales. However, the company has been working to recover from this setback and has been focusing on expanding its online presence, introducing new products, and improving its supply chain management.

In 2022, Titan reported a strong financial performance, with its jewelry business witnessing a significant recovery. The company’s revenue grew by 24% year-on-year, driven by a strong demand for gold jewelry and a recovery in the wedding season. However, in 2023, the company’s growth slowed down due to high gold prices and intense competition.

Summary in Bullet Points:

• Titan Company’s stock price plummeted 4% on July 8 after JPMorgan downgraded its rating from ‘overweight’ to ’neutral’ following a weak Q1 business update. • The company’s jewelry business witnessed a 9% revenue growth in the June quarter, which was lower than expected due to high gold prices and low wedding days. • JPMorgan analysts reduced Titan’s EPS estimate for FY25-27 by 5-6% and warned that the company’s margin profile could be negatively affected if promotional activities persist. • CLSA maintained its “outperform” rating on Titan with a price target of Rs 4,045, citing the company’s strong fundamentals and expecting growth to return when gold prices normalize. • Goldman Sachs maintained its “buy” recommendation on the stock with a price target of Rs 3,700, but expressed concerns about the competition outperforming Titan during the quarter. • Morgan Stanley maintained an equalweight rating on the stock with a price target of Rs 3,526, citing concerns about the company’s ability to achieve its guidance for FY25. • Titan shares have been underperforming the benchmark Nifty 50, declining 14% so far this year. • Investors are advised to consult certified experts before making any investment decisions.