This Tata Company Share Is A Good Buy For A Target Price of Rs 2,900, Says Motilal Oswal

Titan Company is owned by the TATA. The company is one of the country's prominent consumer sector lifestyle companies. It is a major player in the Jewellery, Watches and Eyewear categories with several other brands. It is the fifth-largest integrated own brand watch manufacturer in the world with a market capitalization of Rs 2,11,736 Crore. The share of the company is trading at a Current Market Price of Rs 2,321.90 at 13.38 IST. As per Motilal Oswal Securities, it has the potential for a target price of Rs 2,900.

The company's margin outlook is improving up to 400bp YoY in 4QFY22

The company's new customer additions remain strong, indicating continued market share gains from the competition. The Motilal Oswal Securities stated the company's 4QFY22 result was above their expectations, which was led by healthy sales growth in the non-jewelry segments. According to the brokerage, "The management stated that growth in jewelry sales was strong in Apr'22, in line with its yearly targets. Its margin outlook is improving, with a higher proportion of studded jewelry (up 400bp YoY in 4QFY22), gradually moving towards pre-COVID levels. The opportunity for growth is immense in the jewelry industry, with Tanishq's current market share below 10%."

4QFY22 Results

The brokerage in the report stated, "Consolidated revenue/adjusted EBITDA/adjusted PBT/recurring PAT grew 4%/7.2%/8.1%/16.7% YoY to INR78b/INR8.8b/INR7.9b/INR6.6b in 4QFY22 (est. INR 72.7b/INR 7.4b/INR 6.4b/INR 4.9b). Consolidated gross margin rose 310bp YoY to 25.3%. As a percentage of sales, higher other expenses (+150bp YoY), staff costs (+10bp), and ad spends (+120bp) led to a 30bp expansion in adjusted EBITDA margin to 11.2% (est. 10.2%) in 4QFY22. Sales/adjusted EBITDA/adjusted PAT grew by 33.1%/98.5%/138.4% in FY22. Adjusted segmental performance: a) Jewelry sales grew 2.5% YoY to INR68.4b. Adjusted segment margin was up 90bp YoY to 11.6%. Jewelry sales, excluding bullion, fell 4% YoY. b) Watches sales grew 11.8% YoY to INR6.3b, with adjusted EBIT margin at 1.6% in 4QFY22. The board has declared a dividend of INR7.50 per share."

Buy for target price of Rs 29,000

According to the brokerage, "There is no material change to our FY23/FY24 EPS forecast. Titan has a strong growth runway, given its market share of less than 10% and continued struggles faced by its unorganized and organized peers. Its medium-to-long-term earnings growth visibility is nonpareil. Despite the volatility in gold prices and COVID-led disruptions, its earnings CAGR has been stellar (24%) for the past five-years ending FY22. We expect this trend to continue, with over 20% earnings CAGR in the next couple of years. The stock's near-term multiples appear expensive, but its long runway for profitable growth warrants premium multiples. We maintain our Buy rating, with a TP of INR2,900 per share (75x FY24E EPS)."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal Securities. 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.