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Rakesh Jhunjhunwala portfolio Tata Group stock to hit new high: Should you buy?

Titan Company Limited (Titan), a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO), is the world's fifth largest integrated own brand watch manufacturer. (MINT_PRINT)Premium
Titan Company Limited (Titan), a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO), is the world's fifth largest integrated own brand watch manufacturer. (MINT_PRINT)

  • Titan Company Ltd is a large-cap company with a market capitalization of 2,17,356.69 Crore that operates in the consumer discretionary industry.

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Titan Company Ltd is a large-cap company with a market capitalization of 2,17,356.69 Crore that operates in the consumer discretionary industry. Titan Company Limited (Titan), a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO), is the world's fifth largest integrated own brand watch manufacturer. Titan shares are now trading at a market price of 2,446.95 per share on the NSE, and the stock has provided a multibagger return of 303.12 per cent over the last five years. The stock reached a 52-week high of 2,768.00 on 21-March-2022 and a 52-week low of 1,763.20 on 05-August-2021, indicating that the stock is trading 11.59 per cent below the 52-week high and 38.77 per cent above the 52-week low at the current market price. Following Titan's Q1FY23 earnings, brokerage houses ICICI Securities and Sharekhan are bullish on the stock's potential for a new high. ICICI Securities has set a target price of 2800 for Titan shares, while Sharekhan has given a target price of 2,900, which would be a new high for the stock.

Sharekhan has said in a note that “Titan Company (Titan) began FY2023 on strong note with revenues (excluding bullion sales) growing by 3.0x to Rs. 8,975 crore (including bullion 2.7x to Rs. 9,443 crore). On a 3-year CAGR basis revenues grew by 20% y-o-y with jewellery sales growing by 23% CAGR in the same period. Revenue of the jewellery business grew by 3.0% y-o-y to Rs. 2,600 crore (ex-bullion), while revenues of the watches & eyewear business grew by 2.7x each to Rs. 785 crore and Rs. 183 crore respectively. Titan’s subsidiary, CaratLane registered strong performance by posting revenue of Rs. 482 crore and profit of Rs. 27 crore. TEAL reported revenues of Rs. 88 crore and loss of Rs. 6 crore (before taxes) during the quarter. Consolidated gross margins and EBITDA margin improved by 307bps and 872bps y-o-y to 25.5% and 12.7%, respectively led by better operating leverage and improved mix. EBITDA grew by 8.7x y-o-y to Rs.1,196 crore. Reported PAT stood at Rs. 790 crore versus Rs. 18 crore in Q1FY2022. The Company has added (net) 125 stores during the year. The company’s retail chain (including CaratLane) had 2,303 stores across 366 towns with an area exceeding 2.9 million sq. ft. as on June 2022."

“Titan is aiming to grow its revenue at CAGR of over 20% over FY2022-27 on back of its ambitious growth plan in the medium term. This along with consistent improvement in margins will help cash flows improve strongly in the coming years. FY2023 will be a strong year for the company on back of low base in the core businesses. Stock is currently trading at 67.9x and 53.7x its FY2023E and FY024E earnings. The company’s strong growth outlook, industry tailwinds in the medium term and strong balance sheet makes it a best play in the retail space. Hence we maintain our Buy recommendation on the stock with an unchanged price target of Rs. 2900," said the research analysts of the broking firm Sharekhan.

ICICI Securities has said in a note that “Titan reported a healthy operational performance with strong beat on the margins front. Buoyed by strong festive/wedding season and a normalised quarter after a gap of two years, the jewellery division registered its second highest ever quarterly revenues in Q1FY23. As guided by the management in its pre-quarterly update, the jewellery division (excluding gold bullion sale) reported robust sales growth of 204% YoY to 7995 crore (impressive three year CAGR: 24%). Watches segment reported 169% YoY growth to 786 crore (110% of pre-Covid levels), whereas eyewear division reported 173% YoY growth to 183 crore (123% of pre-Covid levels). Overall consolidated revenues (including gold bullion sale: 356 crore) grew 172% YoY to 9443 crore. Improvement in studded ratio and positive operating leverage led to robust EBITDA margins (up 870 bps YoY to 12.7%). Absolute EBITDA was at 1196 crore with robust three year CAGR of 28%."

“Titan has been an exceptional performer in the discretionary space with stock price appreciating at ~32% CAGR in last five years. We continue to remain structurally positive on the stock as high growth visibility justifies premium valuations and maintain BUY on the stock. We value Titan at 2800 i.e. 66x FY24E EPS," said the research analysts of the broking firm ICICI Securities.

Robust balance sheet and asset light distribution model has enabled it to outpace peers in terms of store addition (to add 40+ Tanishq stores in FY23), aspires to grow jewellery revenues by 2.5x by FY27 (implied CAGR: 20%). Huge headroom for growth with current market share at ~6% in 4 lakh crore market, thrust on the wedding space is bearing fruit with wedding jewellery becoming a critical growth driver while its share in overall jewellery revenue has increased meaningfully and gradual recovery in studded ratio to aid gross margins, going forward are the key markers for future price performance of Titan, as per ICICI Securities.

As per the shareholding pattern of Titan available on BSE, ace investor Rakesh Jhunjhunwala holds 3,53,10,395 shares of Titan or a 3.98% stake in the company and his wife Rekha Jhunjhunwala holds 95,40,575 shares or 1.07% stake in the company as of June 2022.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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