Add This Multibagger Large Cap Tata Group Stock, Shares Likely to Jump, Says Kotak Securities

Leading brokerage firm Kotak Securities in its recent report on Titan Company Limited (Titan) has placed an "Add" rating with a target price of Rs 2,900/share. If we consider the given target price and the current market price, the stock is likely to give a return of 12% on investments.

Titan is a Tata Group company and the fifth-largest integrated own brand watch manufacturer in the world. Titan is widely known for transforming the watch and jewellery industry in India and for shaping India's retail market by pioneering experiential retail.

Stock Outlook, Returns & Market cap

The Titan's stock currently trading at Rs 2,591/share on NSE, 0.93% down from the previous close. Its 52-week low level was recorded on 1 July 2022 at Rs 1,825.05/share and the 52-week high level on 31 October 2022 at Rs 2,791/share, respectively. It is a large-cap stock having a market capitalisation of Rs 2,30,291 crore.

In the past 1 month, it has fallen 2.35%, whereas, it has fallen 2.69% in the last 3 months, respectively. However, over the years, it has performed well and has given multibagger returns to shareholders. In the last 1 year, it has given 10.7% positive returns, and in the last 3 years, it has given 117.98% multibagger returns. In the past 5 years, it has given 214.88% multibagger returns to shareholders.

 

CaratLane: Jewel in Titan’s crown

CaratLane (CL) has emerged as India's leading digital-first omni-channel jewelry brand, with a 53% CAGR in revenue to about Rs22.5 bn and a 10 ppts improvement in EBIT margin to about 7% over FY2020-23E. CL's success is attributable to sharp designs/merchandizing, superior front-end/back-end tech/data capabilities, consumer trust enjoyed (courtesy Tanishq partnership), and the multiplier effect of the omni-channel model. Management is aspiring for revenues of Rs100 bn, 500+ stores and high-teen EBIT margin by FY2027. We expect CaratLane to deliver ~50% revenue CAGR and EBIT margin expansion to 10% over FY2022-25E.

 

CaratLane— India’s leading digital-first omni-channel jewelry brand

CaratLane (TTAN's 72.3% subsidiary) has emerged as the leading digital-first omni-channel jewelry brand in India, with (1) 53% revenue CAGR to ~Rs22.5 bn, driven by healthy growth in customers (lifetime customers up ~3X to 1 mn+), sessions, conversions and repeat sales (~20% repeat customers contributing ~40% to FY2023E sales) over FY2020-23E, (2) retail footprint of 200+ stores across 65+ cities (FY2023E), and (3) EBIT margin of ~7.2% from (-)3%. CL's success is attributable to (1) consumer trust enjoyed (courtesy Tanishq partnership), (2) impressive jewelry designs with regular launch of new collections, (3) tech strength (data-driven decisions/ merchandizing), (4) power of the omni-channel model, and (5) leadership of the Founder.

 

CL is eyeing Rs100 bn sales, 500+ stores and high-teen EBIT margin by FY2027E

CaratLane has streamlined its store expansion/economics in the past 2-3 years and is geared up for the next leg of growth. It has set an ambitious target of Rs100 bn in sales by FY2027. The key pillars of growth are: (1) expansion of store network to 500+ stores from 165 (present); implying 28-30% store CAGR and 35-40% retail area CAGR (FY2022-27E), (2) initiatives that improve conversion rate, such as better inventory alignment, faster delivery, creating awareness and expanding coverage of CaratLane Live and Try-At-Home services, (3) innovations/portfolio augmentation. The above can trigger a virtuous growth cycle (conversion rate improves by 2-3X after the rollout of a store; higher store density triggers a multiplier effect). CL plans to open stores in the US, starting in FY2024 (exports > Rs1 bn in FY2023E). CL has forayed into silver jewelry under the brand 'Shaya'.

 

We value CL at Rs220 bn; it contributes Rs180/share to our SoTP-based FV of Titan (Rs2,900)

Kotak Securities has said, "We value CL at 5.5X December 24E EV/sales (~55X EV/EBIT), implying a FV of Rs220 bn (unchanged). Titan's 72.3% stake in CL contributes Rs180/share to our SOTP-based FV of Rs2,900. CL accounts for ~6.5% of Titan's jewelry sales and it should boost consolidated jewelry sales growth (versus standalone) by ~150 bps in FY2024/25E. Given the 85% studded share, CL can potentially surpass Tanishq (30-32% studded share) on profitability in the next five years. TTAN's LT attractiveness comes from (1) low market share (7%) in a large addressable market and (2) wide gap versus competition and focus on keeping its lead. ADD."

 

Disclaimer

The stock has been picked from the brokerage report of Kotak Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.