Target: ₹3,880
CMP: ₹3,177.50
Titan Company’s Q2-FY25 y-o-y sales growth and commentary on Q3 growth were strong. However, jewellery margins were below our estimate, and it lowered its FY25 core jewellery EBIT margin guidance to 11-11.5 per cent from 11.5-12.5 per cent. Titan expects margins to recover in H2-FY25. We expect Titan to deliver a strong 39 per cent earnings growth in FY26 as its margins normalise.
We lower our FY25E EPS by 8 per cent but cuts to FY26/27 estimates are lower at 4-5 per cent . Our SoTP-based TP declines by 4 per cent to ₹3,880.
While Q2 jewellery sales were already disclosed, Titan expects to continue seeing strong traction in Q3-FY25 and has a favourable base due to the shift in the Shraadh period.
Titan is not seeing any impact of lab-grown diamonds (LGD), except in the large-size solitaires sales, where consumers are waiting it out as international prices have softened. Titan is still evaluating its LGD strategy, but we found management to be more receptive to LGDs. Indians have historically not bought Solitaires due to lack of affordability, but LGD’s can make Solitaires affordable and could open up a new opportunity.
Titan now expects a higher impact of ₹570 crore from the customs-duty cut vs ₹500 crore earlier. This, along with the cut in core margin guidance, results in our EPS estimate cut.
