Titan Company's shares took a notable dip, dropping over 3% on Wednesday following the release of its Q2 FY25 results, revealing a significant decline in net profits. Impacted by the recent cut in customs duty on gold imports, the Titan share price fell as much as 3.69% to ₹3,113.65 on the BSE.
Investors looking to buy shares online might see this as an opportunity, yet the market is factoring in Titan's recent challenges.
Decline in quarterly profit raises concerns
For the quarter ending September 2024, Titan's net profit dropped by 25% to ₹705 crore, compared to ₹940 crore during the same period last year. The customs duty reduction alone affected earnings by around ₹290 crore, underscoring how external policy changes can impact company performance. Those aiming to buy shares online should stay informed about how such factors might shape Titan’s profitability.
Revenue growth and jewellery segment performance
Despite the decline in profit, Titan’s total revenue in Q2FY25 rose by 24% to ₹12,458 crore, compared to ₹10,027 crore in Q2FY24. Titan’s jewellery division, a key contributor, grew 26% year-on-year, reaching ₹10,763 crore, with the India market alone seeing a 25% increase.
The segment’s earnings before interest and taxes (EBIT) stood at ₹932 crore, marking an 8.7% margin. After adjusting for the customs duty impact, Titan’s EBIT margin for Q2FY25 would be approximately 11.4%.
For investors planning to buy shares online, it’s worth noting that the company has revised its guidance for jewellery EBIT margins for FY25 down to a range of 11% - 11.5% from the previously expected 11.5% - 12.5%.
Analyst reactions and revised earnings forecasts
Following the weaker-than-anticipated quarterly results, brokerage firms have lowered their target prices and adjusted earnings expectations for Titan. Many analysts pointed out that the customs duty reduction, while supportive of jewellery sales, adversely affected reported margins. Additionally, the product mix, with fewer higher-margin items, impacted the company’s profitability.
Several firms adjusted their earnings per share (EPS) estimates for Titan for FY25-27 by around 3-7% and revised target prices. For those looking to buy shares online, understanding these revised forecasts and the factors behind them can provide insight into potential risks and rewards.
Competitive landscape and future prospects
Analysts also highlighted competition in the jewellery sector and shifting consumer spending patterns as potential factors affecting Titan's growth. The current competitive environment, coupled with changing urban consumption trends, suggests Titan's share price may face fluctuations in the short term.
Investors considering buying shares online might want to monitor these developments closely as the company adjusts to a more competitive market and aims for sustainable profitability.
Long-term outlook for Titan shares
While Titan’s recent performance and guidance adjustments may seem concerning, some experts believe that the company remains a strong player within the jewellery and luxury goods markets. Despite short-term pressures, Titan's consistent brand reputation and expansion strategies may offer value to long-term investors.
For those interested in the option to buy shares online, evaluating Titan’s long-term market position and resilience could be essential in making an informed decision.
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