Shares of Titan Company Limited fell to an 18-month low of ₹3,031 on the BSE on March 4, 2025, as they dropped 2% during intraday trading. The jewellery giant, known for its Tanishq brand, faced selling pressure due to margin concerns, dragging the stock to its lowest level since August 2023.
Titan’s Underperformance in the Market
Over the past month, Titan’s stock has underperformed the broader market, plummeting 17% after reporting lower-than-expected margins in the December 2024 quarter (Q3FY25). In comparison, the BSE Sensex declined 7.2% over the same period, highlighting Titan’s sharper downfall.
Titan’s Financial Overview and Challenges
Titan, a joint venture between Tata Group and Tamilnadu Industrial Development Corporation (TIDCO), has historically been a strong player in the jewellery sector. While demand trends remain positive, analysts caution that rising gold prices and gold lease rates could pose near-term challenges. Despite the management maintaining its standalone EBIT guidance of 11-11.5%, analysts are skeptical about short-term headwinds due to intensifying competition.
Q3FY25 Performance Breakdown
Titan’s Q3FY25 results revealed mixed performance, with revenue growth but declining margins:
- Standalone EBIT Margin: Contracted 203 basis points (bps) to 9.3% from 11.3% in Q3FY24
- Standalone EBIT Growth: Up 1.9% YoY at ₹1,506 crore, compared to ₹1,478 crore in Q3FY24
- Standalone Profit Decline: Down 4.9% YoY at ₹990 crore, compared to ₹1,040 crore a year ago
- Total Income Surge: Up 24.2% YoY to ₹16,228 crore, compared to ₹13,071 crore in Q3FY24
Impact of Rising Gold Prices and Festive Demand
Titan’s revenue growth was driven by strong performances in the jewellery and eyewear segments. The festive quarter (Q3FY25) witnessed a robust 28% growth in secondary sales, supported by:
- Wedding-related purchases rising 29%
- Same-store sales growth of 22% compared to Q3FY24
However, the company faced customs duty-related losses on inventory, affecting profitability. The management confirmed that these losses have been fully realized in Q3FY25.
Analysts’ Perspective on Titan’s Future
Despite recent stock declines, analysts remain optimistic about Titan’s long-term potential.
Centrum Broking’s Take:
- The brokerage firm remains positive on Titan’s topline growth, driven by strong demand across its business segments.
- Titan’s strategy focuses on serving millennials with aspirational designs and digital channels while strengthening wedding jewellery sales.
- Growth in Caratlane, Watches & Wearables, and Eyewear divisions adds to Titan’s revenue streams.
Nuvama Institutional Equities:
- Studded jewellery sales dipped to 23% due to stronger demand for gold jewellery.
- Rising gold prices, evolving product mix, and higher competition are affecting Titan’s margins.
- The slight decline in core-jewellery EBIT margins is encouraging despite lower studded sales.
Motilal Oswal Financial Services:
- Titan’s competitive positioning in sourcing, studded ratio, and reinvestment strategy continues to provide an edge over other branded players.
- The Tanishq brand’s strong recall value and market moat will sustain Titan’s leadership in the jewellery category.
- Titan’s non-jewellery businesses (watches, wearables, eyewear, and Caratlane) are scaling up well and will contribute to future growth.
Margin Concerns and Competitive Pressure
One of the key reasons for Titan’s stock decline is the contraction in EBITDA margins. Analysts expect a further margin squeeze in FY25, primarily due to:
- Lower studded jewellery sales mix
- Intensifying competition from other jewellery brands
- Higher gold prices impacting affordability
Monitoring margin trends will be critical, as profitability remains a key concern for investors.
Titan’s Outlook: A Balancing Act
Titan remains one of the most valuable jewellery brands in India, backed by its strong market presence and customer loyalty. However, the company faces short-term challenges with margin pressures, rising gold prices, and increased competition.
On the positive side:
- Discretionary income is expected to rise with lower tax rates, supporting demand.
- The wedding jewellery segment continues to grow at a robust pace.
- Titan’s diversification beyond jewellery (watches, wearables, and eyewear) offers long-term growth potential.
Conclusion: Short-Term Weakness, Long-Term Strength
Titan’s stock hitting an 18-month low may present a buying opportunity for long-term investors. While margin pressure and competition remain concerns, the company’s brand strength, diversified business segments, and strategic expansion provide optimism for future growth.
Investors should monitor gold price trends, competitive dynamics, and margin performance before making investment decisions. Despite near-term volatility, Titan’s strong fundamentals make it a compelling long-term play in India’s luxury and discretionary spending market.
