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Rakesh Jhunjhunwala’s favourite shares see worst fall in 6 years after gold prices hit jewellery demand in Q1

Titan Company shares plunged by more than 14% to hit the day’s low at Rs 1,072.60 on BSE.

Shares of Rakesh Jhunjhunwala’s favourite scrip Titan Company Ltd registered their steppest intra-day fall in over 6 years after the firm said that rising glod prices hit jewellery demand in the first quarter on FY19. Titan Company Ltd shares plunged by more than 14% to hit the day’s low at Rs 1,072.60 on BSE. “The quarter witnessed a tough macro-economic environment with consumption being hit. Very high gold prices particularly in June also impacted growth in the Jewellery industry. Against this background, the Company’s growth particularly in the Jewellery segment was lower than planned even though the gains in market share were sustained,” Titan said in its quarterly update on the exchanges. 

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In the latest quarter, revenues from jewellery grew by a muted ~13% in as sharp increase in gold prices dented consumer demand significantly in the month of June, said Titan. “Wedding jewellery & studded group witnessed decent growth in the quarter. Sales on the auspicious occasion of ‘Akshaya Tritiya’ were robust,” added the firm. Taking stock of the development, global firm Credit Suisse has maintained an Underperform rating on the stock, with a target of Rs 1,250. Stretched valuations and near-term softness in demand cap upside, noted the firm. The impact of these higher gold prices should not last beyond a few months, the firm added. Titan shares have gained by more than 50% in the last one year. Credit Suisse attributes the stellar rise in the stock price to re-rating of the PE multiple.

“The stock is trading at 48 times FY21 estimated earnings, which is at a premium to HUL. Only upside on the stock at these levels is a potemtial EPS upgrade,” Credit Suisse noted, while at the same time cutting earnings estimate by 2% in the latest quarter. Research and brokerage firm Reliance Securities has lowered its estimate for Titan Company’s fiscal 2020 revenue by 3.3% and that of FY21 by 5.6%, given the general economic slowdown. Reliance Seucirites estimates the company’s total revenue to grow 15.6% on-year in FY20 to Rs 22,000 crore, and expects growth at 15.50% in FY21 to Rs 25,500 crore.

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Source: Financial Express