Titan stock glitters after Q4 replace; are investors clutching at straws?

MUMBAI: Shares of Titan Company Ltd rose 11% appreciation on Thursday after the firm shared an replace of its March quarter performance with investors. The stock has now risen 41% from the 52-week lows they hit in raze-March.

At the initiating witness there isn’t powerful to be serious about in the quarterly replace. Titan acknowledged indispensable disruptions in operations in March maintain severely impacted income yell in the fourth quarter and in consequence in the monetary 365 days 2020.

The firm added that revenues from jewelry industry, which narrative for a lion’s share of Titan’s numbers, declined by 5% 365 days-on-365 days final quarter. This reflects the inability of sales in March due to the the lockdown imposed to curtail the unfold of covid-19. Revenues of the segment had grown 11% in the December quarter, and the firm moreover disclosed that income yell in January and February modified into as soon as at 16.5%. As such, the fall in revenues in March is spacious. Analysts estimate jewelry revenues to maintain declined by about 50% in March.

Nevertheless some optimistic investors peaceable chanced on comfort from the numbers. They’re encouraged with the wholesome income yell in January and February. “It reveals underlying request is sturdy,” acknowledged an analyst soliciting for anonymity.

The firm acknowledged the watches segment did well, clocking 1% income yell, no topic the inability of sales due to the the lockdown.

Nevertheless provided that the lockdown is till 15 April, with possibilities of further extension, the June quarter would possibly moreover be anticipated to be severely impacted too. And even after the lockdown is lifted, request is at risk of be below stress in the shut to future, as footfalls would possibly well be lower in the initial phases. Plus, if earnings ranges fall considerably, request for consumer discretionary products would grab a knock.

In this backdrop, analysts request the most primary half of of this monetary 365 days to be softer, adopted by a restoration in the 2d half of of the 365 days. “Whereas we learn a pair of wide impact in the half of 365 days ending September, together with the deferral of weddings, we learn a pair of few of this request coming support in the 2d half of of business 365 days 2021 (H2FY21) as weddings will doubtless salvage bunched up in H2FY21,” acknowledged analysts from Macquarie Capital Securities (India) Pvt Ltd in a narrative. “For FY21 beefy 365 days, we’re building in flattish sales for Titan,” added the brokerage.

After the original restoration in Titan’s shares, they commerce at about 48 times estimated earnings for this monetary 365 days, in accordance with Bloomberg. Those are elegant lofty valuations for a sector that is depending on discretionary consumer spending.

“In the absence of better investment alternatives in the sector, Titan would proceed to utter excessive valuations,” point out analysts from Dolat Capital Market Pvt Ltd.

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