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A buy call recommendation has been given to Tata Consumer Products Ltd and Titan Company Limited (Titan), a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO). Geojit has recommended Tata Consumer Products with a target price of Rs. 862, while IIFL Securities has recommended Titan with a target price of Rs. 2735. Both stocks have been assigned a one-year target period to reach their target prices.
Investment rationale for Titan as per IIFL Securities
- Titan reported results above our estimates, with the 22% beat on Ebitda driven by higherthan-expected jewellery operating margins (13% ex bullion). Sales grew 78% YoY, with all segments reporting high growth.
- The margin beat was driven by operating leverage (32% 2-year Cagr in jewellery business), although studded mix has not fully normalised: 30% this quarter, higher than the 26% a year ago.
- Increase in share of wallet for jewellery, strong wedding demand and pent-up demand are some of the factors that have aided growth this quarter. Wedding sales grew 81% YoY on the back of improved consumer confidence post the second wave of COVID.
Investment rationale for Tata Consumer Products
The brokerage firm Geojit has said "During Q3FY22, revenue grew 4.5% YoY to Rs. 3,208cr (+5.8% QoQ, +4% in cc terms), aided by strong volume growth in India business, esp. in Sampann portfolio (+39% YoY volume growth), and also in the salt category owing to price hikes, as well as strong sequential recovery in the tea portfolio, Soulfull, and Starbucks. EBITDA rose 34.7% YoY to Rs. 487cr, as EBITDA margin improved by 340bps YoY to 15.2% due to high margin product mix. Adj. PAT grew 24.0% YoY to Rs. 278cr."
"Company's new product offerings in Soulfull, acquisition of Tata Q business, as well as expansion of offerings through its online D2C channel 1868 should aid performance in the coming quarters. Meanwhile, its Tata Salt and Sampann portfolio is expected to continue to perform well, aided by recent price hikes and significant volume growth. Similarly, the beverages line-up, esp. its tea range should see improvement in margins with reductions in input costs. We estimate PAT to grow at 21.4% FY21-24E CAGR and EBITDA margin to improve to 15.2% by FY24E. We reiterate our BUY rating on the stock with a rolled forward target price of Rs. 862 based on 50x FY24E Adj. EPS", says Geojit.
Disclaimer
The stocks have been picked from the brokerage report of IIFL Securities & Geojit. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
