Titan Ltd shares plunged nearly 14% in early trade on Tuesday, i.e. 9 July, after the company said demand for jewellery was hit during the April-June quarter due to rising gold prices.
In its quarterly update released on Monday, Titan said that Q1 growth in the jewellery segment stood at a lower-than-expected 13% as sharp increase in gold prices dented consumer demand significantly in June.
Titan’s watches division saw revenue growth of 19%, helped by a large order from Tata Consultancy Services (TCS), while the eyewear segment grew 13% during the first quarter of FY20.
At 10:23 am, Titan shares were trading 13.6% lower at Rs 1,081.75 at BSE after hitting an intra-day low of Rs 1,078.
Notably, global brokerage firm Morgan Stanley on Monday downgraded Titan to equal-weight from overweight with a target price of Rs 1,300 per share.
According to Morgan Stanley, the downgrade is not on the basis of earnings. However, it sees less room for any more positive surprises in the coming quarters.
The stock’s 12-month forward price to earnings ratio at 53 times is at peak level in the last decade and at a 25% premium to its five-year average. After the stock’s run-up, re-rating is complete, said the brokerage firm, adding that balanced risk-reward prompts us to take a breather and await a better entry point.
“Titan remains one of our favourite long-term plays on urban discretionary consumption growth in India. However, following the strong trailing performance, we are now reluctant to push multiples beyond current levels. We see balanced risk-reward at the current stock price,” Morgan Stanley explained.
The brokerage firm now recommends investors to shift to companies with high operating leverage. It prefers Jubilant Foodworks over Titan in the current scenario.
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