Tata Stock To Glitter, Suggested As Buy With Potential Rally Of 20%; Jhunjhunwalas Among Top Winners

Titan Company, the leader in the jewellery segment in India in terms of market share, is likely to glitter ahead after its healthy Q2 results. This Tata stock has a potential of up to 20% rally as brokerages recommended buying with a target price in the range of Rs 3,300 to Rs 3,900. The biggest winners of this strong rally in Titan will be Jhunjhunwalas whose majority of portfolio gains come from the company's performance. Titan's share price reversed the trend and traded in green on Tuesday.

On BSE, the stock has gained by over 1% with an intraday high of Rs 3,299.95 apiece. The market cap of Titan is nearly Rs 2.91 lakh crore. Titan is the largest company in Indian gems and jewellery segment in terms of market share.

The majority of brokerages have recommended buying in Titan share price and ace investors like Jhunjhunwala will be bagging hefty gains.

As per the shareholding pattern, Rekha Jhunjhunwala after her late husband Rakesh who was also a market mogul, holds a huge 47,695,970 equity shares or 5.4% stake in Titan Company. Jhunjhunwala's are among the top public shareholders in Titan. As per Trendlyne data, Jhunjhunwala's holding in Titan is valued at over Rs 15,620 crore currently, making the jewellery company the largest stock in their portfolio.

In the second quarter of FY24, Titan earned a net profit of Rs 916 crore on a consolidated basis, rising by 10% from Rs 835 crore in the same quarter a year ago. Consolidated revenue from operations which includes sales of products and services along with other operating revenues, came in at Rs 12,529 crore in Q2FY24, rising by a whopping 36.73% from Rs 9,163 crore in Q2 of the previous fiscal.

Consolidated EBIT climbed by 16% YoY to Rs 1,392 crore in the quarter under review. Meanwhile, Standalone PAT was also up by 10% to Rs 940 crore, while total income was up 21% YoY to Rs 10,027 crore.

After the Q2 results, Emkay Global in its note said, "TTAN's Q2 EBITDA was 10-11% higher than expected, due to margin coming in 140bps better, despite high competition. Given this strong margin, TTAN is likely to deliver at the top-end of its targeted 12-13% EBIT band in the Jewelry business, warranting a 6-7% increase in FY24-26E EBITDA and 10% growth in standalone TP multiple to 59x. Caratlane has been delivering ~50% topline CAGR and seeing gradual margin increase; further stake consolidation affirms another 3% rise in the multiple to 61x and overall TP upgrade of 18%."

Further, Emkay's note added, "We value Caratlane at Rs205bn vs. the Rs170bn valuation paid by TTAN. As for the labgrown threat, TTAN attributed only the fall in solitaire prices (vs. the entire studded pack) to demand-supply mismatch; it expects a lower impact with an investment focus on Indian consumers vs. global trend. We stay confident about market-share gains, on TTAN's cross-functional strengths and incremental growth potential from International and Taneira. Despite the 18% upturn in TP, we maintain HOLD, with TP of Rs3,670/sh and suggest to buy on dips."

As for Prabhudas Lilladher, the brokerage said, "TTAN is nurturing 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) new segments wearables, dress material, handbags and fashion accessories. TTAN is a formidable play on emerging lifestyle segments which will gain from rising discretionary spending. TTAN trades at 58.9x Sept25E EPS with 17.3% EPS CAGR over FY23-26. Retain Accumulate with DCF-based target price of Rs3387 (rollover to Sept25, Rs3312 earlier)."

Meanwhile, JM Financial in its note added, "Management re-iterated its margin guidance of 12-13%. There are some bits of unevenness in terms of the festival calendar so some sales could have been phased between 2Q and 3Q but the underlying momentum for the category still seems to be reasonably buoyant. Watches grew very well but the margin did not adequately reflect leverage from the scale achieved (crossed INR10bn per quarter for the first time) - likely due to margin drag from the growing share of Wearables - now at c.16%. We expect Titan to continue commanding a premium valuation, more so given the scarcity of 'growth businesses' in the space at this point. Maintain BUY." The target price is set at Rs 3,705 apiece.

Moreover, as per Motilal Oswal, Titan is one of the few consumer companies that has 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. TTAN is on track to achieve the existing jewellery revenue guidance of 2.5x FY22 revenue by FY27, implying an impressive CAGR of 20%. With a current market share of ~7% in a sizable Rs 5 trillion, market, there is significant headroom for growth."

Additionally, Motilal Oswal's note said, "The gradual recovery in the studded ratio is expected to support improved gross margin in the future. Its healthy growth outlook, favourable industry trends, and a strong balance sheet make it a compelling option in the discretionary sector. TTAN has an impressive track record of outperforming its peers as well as exceptional long-term growth potential, all of which justify its premium valuations. We reiterate our BUY rating with a TP of Rs 3,900 (premised on 65xFY25E EPS) and continue to maintain it as our Top Consumer Discretionary idea in India."

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.