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Rakesh Jhunjhunwala's this Tata stock is a hot pick; 4 trigger points for future performance

In his portfolio, Jhunjhunwala's majority of assets in value terms is in Tata Group-backed Titan Company. (Bloomberg)Premium
In his portfolio, Jhunjhunwala's majority of assets in value terms is in Tata Group-backed Titan Company. (Bloomberg)

  • As of March 31, 2022, Rakesh holds 35,310,395 equity shares or 3.98% in Titan, while his wife Rekha Jhunjhunwala holds 9,540,575 equity shares or 1.07% in the company.
  • Titan's total income for FY22 was at 26,411 crore, higher by 36% compared to 19,426 crore in FY21 (excluding bullion sales).

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Big Bull, Rakesh Jhunjhunwala is known for making notable gains from a diversified pool of stocks that he holds. In his portfolio, Jhunjhunwala's majority of assets in value terms is in Tata Group-backed Titan Company. In the gems and jewellery sector, Titan is seen to hold a significant position and its growth outlook remains strong. Due to high growth visibility in earnings, Titan stock has the potential for robust upside going forward.

Jhunjhunwala who is often referred to as the 'Warren Buffet of India' have stayed with Titan shares since 2015. He has modified his shareholding in Titan on numerous occasions since then. As of March 31, 2022, Rakesh holds 35,310,395 equity shares or 3.98% in Titan, while his wife Rekha Jhunjhunwala holds 9,540,575 equity shares or 1.07% in the company.

Rakesh manages his and his wife's portfolio. Together, the couple holds 44,850,970 equity shares or 5.05%.

On Wednesday, Titan shares corrected tracking a broader bearish markets tone, and also stayed on the downside. On BSE, the shares closed at 2110.80 apiece down by 2.57%.

Despite the dive in today's market price, Titan still has given nearly double-digit returns in percentage terms to its investors in a year.

On Dalal Street, Titan shares have skyrocketed by nearly 39% in a year. On May 19 last year, Titan shares stood at 1521.85 apiece.

As per Trendlyne data, as of today, Jhunjhunwala's total portfolio values to around 28,767.48 crore. Of which, his holding values to 9,599 crore in just Titan - making it the most valued stock in his portfolio.

Analysts are optimistic about Titan stock ahead due to its robust balance sheet and strong market presence. On Titan's upside ahead, Jhunjhunwala too will add notable gains in his portfolio.

Despite disruptions in Q1 and as well as Q4, Titan managed to deliver a solid all-around performance for the financial year FY22. The company's total income for FY22 was at 26,411 crore, registering a growth of 36% compared to 19,426 crore in FY21 (excluding bullion sales). Titan posted a profit of 2,983 crore (before taxes and exceptional items) for the fiscal year in comparison to, 1,370 crore in FY21, a growth of 118%.

For the fourth quarter of FY22, Titan stated that Q4 FY22 ended with a satisfactory performance despite partial lockdowns, volatility in gold prices, and uncertainty in a fragile geopolitical situation.

Why Titan is a hot pick

Bharat Chhoda and Cheragh Sidhwa Research Analysts at ICICI Direct in their note said that Titan has been an exceptional performer in the discretionary space with stock price appreciating at ~36% CAGR in the last five years.

In the analyst meet, ICICI Direct analysts cited that Titan's management listed out growth pillars for its core business (jewellery & watches) and emerging concepts (ethnic, wearables and international business). It expects to grow jewellery revenues by 2.5x by FY27 (implied CAGR: 20%). Huge headroom for growth with a current market share less than 6% in 4 lakh crore market.

Further, the management targets high growth for wearable categories (~6x) with the ambition to grow the watches division to 10,000 crore in FY26 with 18% EBIT margins. Also, they believe the new initiative to achieve sizeable revenues by FY27 ( 1000+ crore).

In Q4FY22, the company's Jewellery business registered an income of 6,132 crore compared to 6,397 crore in Q4 FY21 (excluding bullion sale), a decline of 4%. Watches & Wearables business reported an income of 622 crore with 12% growth in Q4 FY22 compared to 555 crore in Q4 FY21. EyeCare business reported an income of 134 crore with 6% growth in Q4 FY22 compared to 127 crore in Q4 FY21. Other businesses comprising

of Indian dress wear and Fragrances & Fashion accessories reported an income of 42 crore in Q4 FY22 compared to 35 crore in Q4 FY21, a growth of 20%.

On future outlook, CK Venkataraman, Managing Director of Titan in the financial audit report had stated, "The Company is well prepared and looking forward to an exciting Q1 with all its stores ramped up for a much-awaited Akshaya Tritiya festival this year. With the international expansion in GCC markets and the first Tanishq store coming up in the US, we are gearing up to touch new horizons in FY23."

"We continue to remain structurally positive on the stock as high growth visibility justifies premium valuations and maintain a BUY on the stock," the duo said.

The analysts highlighted four triggers for future price performance in Titan. These are:

1. Robust balance sheet and asset-light distribution model has enabled it to outpace peers in terms of store addition (to add 40+ Tanishq stores and 100+ watches store in FY23).

2. Tanishq’s penetration is still at a very nascent stage in the Indian jewellery market (< 6% market share). This provides immense opportunity for Titan to enhance its market share. Mandatory gold hallmarking would further enhance market share gains from unorganised space.

3. Thrust on wedding space is bearing fruit with wedding jewellery becoming a critical growth driver while its share in overall jewellery revenue has increased meaningfully.

4. ICICI Direct analysts bake in revenue, earnings CAGR of 20%, 30%, respectively, in FY22-24E.

Thereby, the analysts mentioned above have set a Buy recommendation with a target price of 2725 i.e. 66x FY24E EPS.

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