Tata's Jewellery Stock Titan Has 16% Potential Upisde For Rs 4,200 TP: Prabhudas, Motilal Recommendations

Tata Group-backed gems and jewellery-making stock Titan Company is a leader in its segment. Brokerages Prabhudas Lilladher and Motilal Oswal have recommended accumulating or Buy Titan stock price after its Q3 results. Even though Titan posted a broad-based growth, it missed margins and PAT during the quarter. Nonetheless, there is still potential for over 16% upside in Titan Company.

Titan Share Price:

On February 2nd, Titan's share price ended at Rs 3,613.75 apiece, down by 0.34% on BSE with a market cap of Rs 3,20,823.72 crore.

In the trading week from January 29 to February 2nd, Titan shares have dipped by 5%. But the share price's six-monthly gains are about 24.5% on BSE.

Titan Q3 Results:

Titan (Consolidated) recorded an income growth of 24% in Q3FY24 compared to Q3FY23. PAT meanwhile stood at Rs 951 crore, up by 9.4% YoY. Here are the details of segment-wise performances:

Jewellery: Total Income for the quarter grew 23% over Q3FY23 to,11, 709 crores. The India business grew 21% in the same period. The festive season saw a healthy double-digit buyer growth. The business continued to run its attractive programs that helped maintain growth momentum amidst an environment of high gold prices. EBIT at Rs 1,432 crores recorded a margin of 12.2% for the quarter.

Watches & Wearables: Business recorded a Total Income of Rs 982 crores, up 21% compared to Q3FY23. The domestic business grew 23% in the same period. Analog watches Revenues of Rs 810 crores grew by 18% and the Wearables portfolio Revenues grew 65% to Rs 136 crores respectively over Q3FY23.

EyeCare: Total Income of,167 crores in Q3FY24 declined 4% compared to Q3FY23. EBIT for the business came in at Rs 14 crores clocking a margin of 8.4% for the quarter.

Emerging Businesses: Total Income of Rs 112 crores for Q3FY24 for the Emerging Businesses comprising of Indian Dress Wear ('Taneira') arid Fragrances, and Fashion Accessories (F&FA) grew 26% compared to the same period last year.

Caratlane Trading Private Limited's total Income grew 32% to ~893 crores as compared to Q3FY23.

Titan Share Price Target:

In its research note, Prabhudas Lilladher said, "We cut FY24/25/26 EPS by 2/1.6/1.4% following margin pressure across segments indicating some softness in demand and higher competition. TTAN 3Q24 PAT missed estimates, led by a 200bps lower share of studded jewellery, muted demand in Q3 amid high gold prices & higher completion from smaller and unorganized players (more consumer offers). Watch margins suffered due to higher investments behind wearables/ Fastrack and higher sales of margin dilutive online channel."

Further, PL's note added, "4Q Jewellery demand outlook is positive (January month sales) given marriage season and stabilization in Gold prices. We expect improvement in watch margins, however, Eyewear seems to be having poor visibility due to heightened competition. TTAN continues to imbibe multiple growth engines led by 1) Jewellery network expansion, regional thrust and sub-brands like Mia, Zoya and Caratlane 2) Omni-channel strategy across jewellery, watches and eyewear 3) rising presence in higher growth segments of wearables, dress material, handbags and fashion accessories."

"TTAN is a formidable play on emerging lifestyle segments which will gain from rising discretionary spends. TTAN trades at 58.4x FY26E EPS with 23% EPS CAGR over FY24-26. We assign DCF based target price of Rs3627 (Rs3640 earlier). We recommend Accumulate TTAN on declines for LT gains," PL lastly said.

Meanwhile, Motilal Oswal in its note said, "We cut our EPS by 7.4%/3.4% in FY24/FY25 and reset our margin assumption," adding, "Titan is one of the few consumer companies that have been growing revenue at this pace despite the high base and discretionary nature of its product segments. This underscores the superior brand positioning and the prowess of its franchise. Titan is on track to achieve the existing jewelry revenue guidance of 2.5x FY22 revenue by FY27, implying an impressive CAGR of 20%. With a current market share of ~8-9% in a sizable ~INR5t market, there is significant headroom for growth."

Also, Motilal's note said, "The gradual recovery in the studded ratio is expected to support improved gross margin in the future. Its healthy growth outlook, favorable industry trends, and strong balance sheet make it a compelling option in the discretionary sector."

Moreover, Motilal's note added, "We model a 15% revenue CAGR with an EBITDA margin of ~11-12% during FY24- FY26E. In a slower consumption environment, the Jewelry category growth is still outperforming. We will watch the near-term consumption trend, but will continue to like Titan for its best-in-class execution track record and its hunger to keep expanding the user base. Consumers' preference towards branded Jewelers will continue to keep the category growth rate at an attractive level."

On the valuation, Motilal's note said, "Reiterate BUY with a TP of INR4,200 (premised on 68xDec'25E EPS). We continue to maintain Titan as our top consumer discretionary play in India.

Titan Company is a joint venture between the Tata Group and the Tamilnadu Industrial Development Corporation (Tl DCO), commenced its operations in 1987 under the name Titan Watches Limited. Over the last three decades, Titan has expanded into underpenetrated markets and created lifestyle brands across different product categories including fragrances (SKINN), accessories and Indian dress wear (Taneira) and thoughtfully designed Women Bags (IRTH). Titan is widely known for transforming the watch and jewellery industry in India and for shaping India's retail market by pioneering experiential retail.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.