As Gold prices rise, Titan loses sales, value and ratings

• Titan revised its revenue guidance from 20% to 11-13% year-on-year.
  
• In its Q2 earnings, Titan’s net profit rose by 2% to ₹320 crores.
  
• But it also saw a 2% fall in standalone jewellery revenues.
  

It was a muted festive season and that is reflecting in Titan’s quarterly earnings that ended in September. Its standalone jewellery revenues fell by 2%. More importantly, it cut its revenue growth forecast from 20% to 11-13% for the current fiscal.

As expected, its stock fell by 10% intra-day to trade at ₹1163 at 2.25 pm after its earnings were declared yesterday evening.

After the management itself lowered its outlook, most brokerages followed suit.

UBS group maintained its BUY rating but at a lower price target. Meanwhile, Goldman Sachs maintained a neutral rating and also cut its price target. JP Morgan downgraded Titan to neutral.

“In Q2FY20, muted consumer sentiment and sharp increases in gold prices hurt demand for jewellery. According to management, low ticket size discretionary purchase items were worst impacted. High promotions in August and September helped mitigate this somewhat with the non-discretionary wedding jewellery portfolio growing 30% year-on-year in Q2FY20,” said the UBS report.

Titan reported 1.5% annual decline in profits despite actual retail growth of 7% due to maturity of hedges, added the report.

In the second quarter, Titan’s net profit rose marginally by 2% to ₹320 crore.