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Buy 1 Large Cap, 2 Midcap Multibagger Tata Group Stocks To Get Up To 23% Returns, Says ICICI Direct

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ICICI Direct, a leading brokerage firm, is bullish on three multibagger Tata Group stocks. The Indian Hotels Company Limited, Trent Ltd, and Titan Company Limited are three multibagger stocks. Indian Hotel Company and Trent, both are mid-cap stocks, while Titan is a large-cap stock. With the given target prices to the stocks, the brokerage claims a potential upside of up to 23% from their current level. Here are the key takeaways from the stocks:

 

 The Indian Hotels Company Limited (IHCL)
 

The Indian Hotels Company Limited (IHCL)

With room inventory of 178 hotels with 20,826 rooms, Indian Hotels (IHCL) occupies a diversified position in the hotel industry through brands such as Taj, Vivanta, SeleQtions and Ginger brands. IHCL enjoys strong support from its promoter Tata Sons and is also an important strategic business for the Tata Group.

The brokerage has placed a buy call on the stock with a target price of Rs 380 per share. The brokerage sees a 21% upside in the stock from its current level if the stock is purchased at the current market price. The IHCL shares last traded at Rs 315.35 per share, 6.89% down from its previous close.

The stock has given 5.8% and 4.54% negative returns in 1 week and 1 month, respectively. The stock surged 51.68% in 1 year, 115.18% in 3 years, and 181.69% in 5 years, respectively. It has given multibagger returns in the past 3 and 5 years.

Q2FY23 results

According to the brokerage, Revenue growth was healthy. However, margins & profitability remained marginally below our estimates. 

Revenues grew 69.2% YoY to Rs 1232.6 crore (vs. I-direct estimate: Rs 1190.1 crore). It was also up 22.4% vs. pre-Covid levels (i.e. Q2FY20). EBITDA margins expanded 800 bps from pre-Covid levels to 23.9% (lower than our estimated margin of 27.8%). It declined 590 bps QoQ. Despite lower-than-expected margins, it remained one of the highest ever margins so far reported in the past 10 years during Q2. Net profit was up 70.5% from pre-Covid levels to Rs 121.6 crore.

Trent Ltd

Trent Ltd

Trent is India's leading retailer with a presence across various consumer categories (550+ stores). Inherent strength of brands (Westside, Zudio, Star, Zara) and accelerated store additions have led Trent to be among the fastest-growing companies in our retail coverage universe.

Trent has been an exceptional performer with the stock price appreciating at ~35% CAGR in the last five years.

The brokerage has assigned the stock a buy call with a target price of Rs 1,730 per share. If the stock is purchased at the current market price, the brokerage expects a 22% upside from its current level. On NSE, Trent shares last traded at Rs 1419.05 per share, down 3.53% from the previous close.

The stock has given 5.77% negative returns in 1 week, whereas, in 3 months, it gave 5.89% positive returns. The stock has given 23.7% positive returns in 1 year. It has given 177.75% multibagger returns in 3 years, and 355.63% multibagger returns in 5 years.

Q2FY23 results

Trent continues to be the fastest-growing apparel company with industry best revenue growth. Revenue compared to pre-Covid levels was at an impressive 220% vs. industry average of 120-135%. 

On a favourable base, sales grew 78% YoY to Rs 1813.6 crore. On a three year CAGR basis, revenue growth was at 30%, the highest among other lifestyle retailers. Gross margins generally tend to be lower in Q2, mainly owing to EOSS (average gross margins in Q2: 46-48%). Q2FY22 was an unusual quarter wherein the company had recorded 52%+ gross margins. Hence, on a significantly high base, gross margins declined 510 bps YoY to 47.0%.

Furthermore, significantly higher opex (up 85% YoY) resulted in EBITDA margins declining 690 bps YoY to 15% (I-direct estimate: 17%). On a three year CAGR basis, EBITDA growth was at an impressive 27%

Titan Company Limited

Titan Company Limited

Titan has transformed itself from a watch maker to an enviable lifestyle company, with jewellery being the leading vertical (85% of revenues). Robust distribution network comprises 2300+ stores spread across 2.9+ mn sq ft. 

Titan has been an exceptional performer in the discretionary space with stock price appreciating at ~30% CAGR in the last five years.

ICICI Direct has given a buy call to Titan stock for potential gains of up to 23% in 12 months with a target price of Rs 3,240 per share. The last traded share price of Titan on NSE is Rs 294.20 per share, 0.41% up compared to its previous close. 

The stock has fallen 4.26% in a week. Whereas, it surged 1.04% in 1 month and 7.26% in 3 months, respectively. Over the past 1 year, it gave 4.89% positive return. Whereas it gave 129.45% multibagger returns in 3 years, and 239.08% multibagger returns in the 5 years.

Q2FY23 results

According to the brokerage, the company witnessed strong double-digit growth across most segments (except eyewear division) with overall sales increasing 18% YoY. 

As guided by the management in its pre-quarterly update, the jewellery division (excluding gold bullion sale) reported robust sales growth of 18% YoY to Rs 7515 crore (impressive three-year CAGR: 27%). Watches division recorded its highest quarterly sales of Rs 830 crore (up 21% YoY). Overall consolidated revenues (including gold bullion sale: Rs 482 crore) grew 22% YoY to Rs 9163 crore.

Despite higher marketing & other expenses, improvement in share of studded ratio and positive impact of low cost diamond inventory led to EBITDA margins expanding 70 bps YoY to 13.6% (second highest margin). Absolute EBITDA grew 29% YoY to Rs 1247 crore (three-year CAGR: 34%). Tracking robust operational performance, PAT grew 30% YoY to Rs 835.0 crore (three year CAGR: 39%).

Disclaimer

Disclaimer

The stocks have been picked from the brokerage report of ICICI Direct. 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.

 

Read more about: indian hotels trent titan tata group
Story first published: Sunday, November 13, 2022, 2:32 [IST]
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