Titan: Share Plunge 14% as High Gold Prices Hit Jewellery Demand

Titan: Share Plunge 14% as High Gold Prices Hit Jewellery Demand: On Tuesday, Titan Ltd shares dived nearly 14% in early trade, after the company reported demand for jewellery was hit during the April-June quarter due to rising gold prices. It is the steepest fall in six years. The company released its quarterly update on Monday. During the event, Titan said, “Q1 growth in the jewellery segment stood at a lower-than-expected 13% as a sharp increase in gold prices dented consumer demand significantly in June.”

The company added, “Very high gold prices, particularly in June, also impacted growth in the Jewellery industry. Against this background, the Company’s growth, particularly in the Jewellery segment, was lower than planned even though the gains in market share were sustained.”

However, the company witnessed decent growth in the wedding jewellery and studded segment in the quarter. Sales on Akshaya Tritiya were robust, Titan Company further said.

Titan said its jewellery segment added 12 Tanishq stores on both gross and net basis during the quarter, with the retail space addition being approximately 34,000 square feet.

Titan’s watches division saw revenue growth of 19%, helped by a large order from Tata Consultancy Services (TCS), while the eyewear segment grew 13% during the first quarter of FY20.

At 10:23 am, Titan shares were trading 13.6% lower at Rs 1,081.75 at BSE after hitting an intra-day low of Rs 1,078.

Notably, global brokerage firm Morgan Stanley on Monday downgraded Titan to equal-weight from overweight with a target price of Rs 1,300 per share.

According to Morgan Stanley, the downgrade is not on the basis of earnings. However, it sees less room for any more positive surprises in the coming quarters.

The stock’s 12-month forward price to earnings ratio at 53 times is at peak level in the last decade and at a 25% premium to its five-year average. After the stock’s run-up, re-rating is complete, said the brokerage firm, adding that balanced risk-reward prompts us to take a breather and await a better entry point.

The brokerage firm now recommends investors to shift to companies with high operating leverage. It prefers Jubilant Foodworks over Titan in the current scenario.