Shares of Titan Company Ltd fell by over 3% to an intra-day low of Rs 3,114 on the National Stock Exchange (NSE) on Wednesday. This drop followed the Tata Group-owned lifestyle products retailer’s announcement that its consolidated profit for the quarter ended September 2024 had declined by 23.1% year-on-year (YoY) to Rs 704 crore.
Q2 Earnings Report: Decline in Profit Despite Strong Revenue Growth
Titan released its financial results for the July-September 2024 quarter on Tuesday, November 5. The company reported a 23% fall in net profits to Rs 704 crore, compared to Rs 916 crore in the same quarter of the previous year.
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However, despite the profit decline, Titan’s revenue from core operations saw a notable increase of 25.8%, rising to Rs 13,473 crore from Rs 10,708 crore year-on-year.
Increased Expenses and Cost Pressures
Titan’s total expenses for the quarter grew by 20% to Rs 13,709 crore, up from Rs 11,402 crore in Q2 of FY24. A significant portion of the expenses stemmed from the cost of materials and components consumed, which surged by 26.6% to Rs 13,432 crore, compared to Rs 10,607 crore in the same period last year.
Profitability Under Pressure: Decline in EBITDA Margin
Titan’s profitability indicators also showed signs of strain. The company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin fell by 430 basis points (bps) to 9.9% in Q2 FY25, down from 14.2% in the corresponding period of the previous year.
Despite the strong revenue growth across various segments, the profitability from the company’s most lucrative segment—the Jewellery business—declined significantly.
Jewellery Segment Performance Takes a Hit
The Jewellery segment, which is the most profitable business for Titan, witnessed a decline in profits by nearly 20% in the quarter. Profits for this segment fell to Rs 974 crore, compared to Rs 1,217 crore in the same period a year ago.
Despite the overall revenue growth from its Watches, Wearables, Jewellery, and Eyecare segments, the decline in jewellery profits played a key role in the lower-than-expected earnings.
Brokerages on Titan Company
Morgan Stanley on Titan
Morgan Stanley has maintained an “Equal-weight” rating on Titan with a target price of Rs 3,532 per share. The brokerage noted strong top-line growth in Q2,
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