Titan Q1 results update
Last updated: 10 Aug, 2020 | 01:24 pm
Earnings below estimates: Titan has reported a net loss ₹270 crore in Q1FY21, as compared with a profit of Rs 370.73 crore a year ago. Analysts had earlier estimates the loss at about Rs 117 crore.
Decline in sales across segments: Jewellery segment which accounts for 80% of the overall sales, saw a revenue decline of more than 70% in the period (excluding bullion sales). Revenue growth in the jewellery segment in May & June month was at about 20% and 72% compared to the same months of previous year. ‘Titan said that lockdown led to zero jewellery sales in the month of April, a month which should have seen very high sales normally due to ‘Akshaya Tritiya’ festival.’ Sales in Watches division was down by 90%, given its discretionary nature.
Stores re-opening gradually: Number of stores that have been reopened is 83% as on 30th June and 97% till date. However, all stores are not operating on all days in all states due to intermittent lockdowns and local restrictions.
Q1FY21 results were expected to be very weak for Titan, due to a sharp drop in discretionary spending as well as the lockdown imposed to contain the pandemic. While the recovery in sales in the Jewellery segment in June (72% on last year) is encouraging, full-fledged demand recovery is at least a few months away.
The recovery has been better than originally envisaged on the back of higher share of wedding jewellery sales (despite the deferment of many weddings), good sales coming from GHS scheme, and investment-led demand leading to higher gold coin sales. The division is targeting for full recovery by Q4FY21. At current market price, the stock is trading at an expensive valuation (PE ratio of 65).
Consensus recommendation: HOLD (based on views of 29 analysts from external research institutions)