After massive losses in April sales owing to the coronavirus lockdown, Titan Company has reopened 83 percent of its stores as the Unlock 2.0 goes on. Global brokerages, however, remain bearish on the Tata Group Company’s stock citing weak business outlook and valuations.

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In its Q1FY21 quarterly update, Titan said, “Almost all manufacturing operations have commenced operations. However, production levels

are low now, given the inventory situation and will be ramped up only gradually when the company sees sales picking up to normal levels.”

Titan also said it has extended financial support to its franchisees and vendors, particularly by providing soft loans at extremely low-interest rates.

As on June 30, the company has a net cash surplus due to the sale of excess inventory in the form of gold to the commodity exchanges and certain vendors. With reopening of channels in a phased manner, the company has kept the launches very tight and postponed some of them to Q2, added Titan in its quarterly update.

Brokerages View

CLSA has a ‘sell’ call on Titan with the target price reduced to Rs 855 per share. Giving the rationale for its bearish stance on the stock post-Titan’s Q1FY21 update, the global brokerage said, “Our numbers build-in a 62 percent and 75 percent drop in overall revenues and EBITDA for Q1FY21. Titan has rebounded on expectations of a recovery in business but we expect the company to be a late-cycle beneficiary with its valuation at 55x FY22CL."

Morgan Stanley maintains 'underweight' call on the stock, keeping the target price at Rs 770 per share. According to the brokerage, Titan is reopening stores rapidly and also witnessing demand recovery in the non-metro cities. Higher demand for gold coins and jewellery is visible. However, full-fledged demand recovery will remain elusive in 2020, the report added.

Meanwhile, Titan share price declined as much as 1 percent to Rs 1,005.8 apiece on the NSE. At 11 am, it traded 0.72 percent lower at Rs 1,009.

Jewellery Division's Update

Titan derives major chunk of its revenue from its jewellery division, which in the month of May and June were at slightly below 20 percent and around 70 percent compared to the corresponding months of the previous year, said the company.

Furthermore, it also sold gold in the bullion market worth Rs 610 crore at market rates to optimise the inventory levels.

The company said that it has reopened 95 percent of its Tanishq stores to date, but store operations will be disrupted if local governments enforce lockdown.

Watches & Wearables

According to the quarterly update, revenue in May and June months was at 5 percent and marginally over 20 percent compared to the corresponding months of the previous year.

Eyewear

The revenue in May and June was at 15 percent and 35 percent compared to corresponding months of the previous year, added the company.

First Published:Jul 8, 2020 2:49 PM IST