Titan share price falls over 3% after weak Q2 results; Should you buy, sell, or hold the Tata Group stock?

Titan share price declined over 3% on Wednesday after the company reported a sharp fall in net profit for the second quarter of FY25 impacted by a cut in customs duty on gold imports. Titan shares sank as much as 3.69% to ₹3,113.65 apiece on the BSE.

Titan Company reported a net profit of ₹705 crore in the quarter ended September 2024, a fall of 25% from ₹940 crore in the year-ago period. The company's earnings saw an impact to the tune of ₹290 crore due to the custom duty cut announced in the Union Budget.

The Tata Group company’s total income in Q2FY25 increased 24% to ₹12,458 crore from ₹10,027 crore in Q2FY24.

Titan’s Jewellery segment’s total income for the quarter grew 26% year-on-year (YoY) to ₹10,763 crore. The India business grew 25% in the same period. The segment’s EBIT at ₹932 crore came at a margin of 8.7% for the quarter. Normalizing the custom duty impact, Q2FY25 EBIT came at ₹1,222 crore, clocking 11.4% margin, the company said.

The company's management reduced its jewellery EBIT margin guidance to 11% - 11.5% for FY25 from 11.5% - 12.5% band earlier.

Brokerages cut target

Brokerages have reduced their target prices on Titan Company shares and also cut earnings per share (EPS) estimates after weak Q2 results and margin guidance cut.

“The impact of custom duty cut, while benefited the jewellery growth, weighed negatively on reported margins, with adjusted also weak due to inferior product mix (lower studded). Overall 2Q, while met our muted expectation, was still lower than consensus. Management commentary on demand was reasonably positive although cut in jewellery margin guidance would be viewed negatively partially due to weak demand for solitaire,” said brokerage firm Jefferies.

Jefferies cuts its FY25-27 EPS estimates for Titan Company by 3-7% mainly on account of lower margin guidance. It retained a ‘Hold’ rating and cut Titan share price target to ₹3,400 per share from ₹3,600 earlier.

“Concerns on moderating urban consumption trends along with elevated competition in jewellery and weaker product mix (partially due to LGD) would likely keep the share price range-bound,” Jefferies said.

Goldman Sachs also lowered its FY25 EPS estimates by 8.7% to build in the lower than expected margins and the full impact of the one-off loss in jewellery.

“We now build in an adjusted jewellery EBIT margin of 11% versus 12% earlier in FY25. We also lower our FY26/27 EPS estimates by 3.5%/1.9% to build in lower jewellery margins from higher competitive intensity, building in 11.5% EBIT margin for FY26/27 in jewellery vs 12% earlier,” said the brokerage firm.

It has a ‘Buy’ call on Titan shares but cut the target price to ₹3,650 from ₹3,750 earlier.

At 10:00 am, Titan shares were trading 1.99% lower at ₹3,168.60 apiece on the BSE. 

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