Tata-Led Titan Stock Down 9% In 5-Days; Jhunjhunwala, LIC Lost Rs 500-1,500 Cr; 5 Brokers Say BUY, Rs 4255 TP

Tata Group-backed gems and jewellery giant, Titan Company has been in a bearish tone for five consecutive days now. The stock has fallen by more than 9% on BSE taking into consideration Tuesday's closing price, but the drop is as steep as 10.5% compared to the intraday low of Rs 3,226.75 on BSE. This has led to heavy losses for renowned investors and on top of the list if none of other than Jhunjhunwalas and LIC among public shareholders.

Titan shares are grappled into selling pressure after its earnings for Q4 were a big miss from estimates for FY24. 5 days ago, the stock was above RS 3,600 and by the end of May 7th, the stock plummeted to as low erasing the Rs 3,300 mark. There has been a sharp correction in Titan shares which has led to a steep dent in the profits of LIC and the late Rakesh Jhunjhunwala's wife Rekha. Both LIC and Jhunjhunwalas are the top public shareholders of Titan.

And Titan is the cash cow for Jhunjhunwalas, their largest shareholding in terms of valuation.

Titan Share Price:

On BSE, Titan's share price ended at Rs 3,276.25 apiece, marginally down from the previous closing price of Rs 3,281.65 apiece. Its market cap is at Rs 2,90,860.94 crore. From April 30th to date, Titan shares are down by Rs 327.20 or 9.08% on the latest closing price.

On April 30th, the stock was at Rs 3,603.45 apiece on BSE.

On May 7th, the stock touched an intraday low of Rs 3,226.75 apiece. And from this level, Titan has nosedived by at least 10.5%.

Accordingly, Titan shares are down by 10.85% on BSE YTD, while in a year, the stock advanced by 19.12%. In 5-years, the stock rallied by 189.5%.

Jhunjhunwalas Shareholding In Titan:

As per the shareholding pattern as of March 30, 2024, Rekha holds 99,03,075 equity shares of 1.12% stake in Titan alone. She also inherited her late husband, Rakesh Jhunjhunwala's Titan shares as well, which are currently 3,75,80,395 equity shares or 4.23% by the end of Q4FY24.

Rakesh was called the 'Warren Buffett' of India when it came to investing in the stock market. Rakesh started his stock market journey with a Titan share back in the late 1990s, his biggest gem was Titan shares which he passed onto his wife.

Together, Rekha holds about 4,74,83,470 equity shares or 5.35% in Titan. Her shareholding on April 30th was valued at around Rs 17,110.43 crore. But by the end of the May 7th session, her shareholding is now valued at Rs 15,531.4 crore, resulting in a loss of Rs 1,553.66 crore. Compared to the May 7th intraday low, Rekha lost as much as Rs 4,984.18 crore before recovering more than half of it.

Jhunjhuwala's net worth is around Rs 37,756.1 crore through her holding in 25 stocks on BSE and NSE. From the total, Titan accounts for 41.14% of the portfolio.

LIC Shareholding Of Titan:

Just like Jhunjhunwalas, LIC which is the largest life insurer in India, also lost hefty from the downfall of Titan shares.

LIC's shareholding in Titan is to the tune of 1,57,73,161 equity shares or 1.78% as of March 31, 2024. On the April 30th price, LIC's shareholding was valued at Rs 5,683.78 crore in Titan but dropped by Rs 516.10 crore to Rs 5,167.68 crore as of May 7, 2024. From the intraday low of Tuesday, LIC lost as much as Rs 1,263 crore in the trading hours before recovering.

Titan Earnings:

Titan (Consolidated) recorded an income growth of 22% in Q4FY24 compared to Q4FY23. EBIT grew by 10% YoY
to Rs 1,192 crore, whereas PBT was flat at Rs 991 crore which included financial costs of CaratLane acquisition and ESOP-related costs. Total Income for FY24 at Rs 47,501 crore grew 23% over FY23. The corresponding PBT grew 4% to Rs 4,623 crore. PAT stood at Rs 3,274 crore, up by 6.8%.

Titan Share, BUY OR SELL?

Despite the latest period drop in its share price, brokerages are optimistic about Titan shares for a long-term trajectory. 5 brokerages have recommended buying.

JM Financial On Titan:

In the near term, growth/margin is likely to be impacted by volatility in gold prices, elections & lower wedding dates. However, for the full year, Titan will target to maintain its jewellery division growth momentum and reiterated margin guidance of 12-13%. Watches/Eyewear performance has been volatile & a lot more work is needed before it reaches steady state.

Stock could react negatively to weak Mar-Q results & near-term demand issues. From the LT's perspective, considering the large opportunity size & Titan's superior execution capabilities, headroom for growth remains strong.

JM says BUY on Titan for a target price of Rs 3,825.

Motilal Oswal On Titan:

The near-term growth outlook appears subdued due to high gold inflation affecting demand sentiments, which is a typical trend during inflationary periods. However, despite the near-term jitteriness, the company remains aggressive in its growth outlook, driven by new store additions, attractive designs, and market share gains, et al. TTAN also maintains a Jewelry EBIT margin of 12-13% for FY25. We will monitor the near-term consumption trend.

Reiterate BUY with a TP of INR4,100 (premised on 65x Mar'26E EPS). We continue to maintain TTAN as our top consumer discretionary play in India.

Emkay Global On Titan:

In our view, near-term EPS growth will be hit by elevated gold prices and added promotions. But we like TTAN's focus on share gains (vs. near-term margin), as the growth outlook remains robust, at ~20% CAGR. TTAN upheld its guidance of jewellery EBIT margin band of 12-13%, which though would probably stay at the lower end, as Q1 is likely to miss the band by a margin. Growth opportunity stays healthy, with entry into new cities/catchments and expansion of existing stores.

TTAN worked on ~100 Tanishq properties in FY24, with 56 new additions and ~50 renovations, as well as ~50-70 Caratlane/Mia store adds in FY24 (Jewelry square footage up 24%). We cut estimates by 5-6% on near-term margin pain but recommend buying into any significant corrections; maintain BUY, with tweaked down TP of Rs4,150 (65x FY26E EPS).

Centrum On Titan:

We remain upbeat on Titan's operating performance led by strong demand across business segments yet its footing in the international market appears to be promising. We reckon Titan's strategy revolving around serving millennials, meeting their aspirational demand with the introduction of new designs and channels, yet a rising share of wedding jewellery could pay richly.

Further with rising consumer interest for BIS hallmarked jewelry and industry formalization showing up in market share gains for Titan. Though the turnaround in the Caratlane, watches, and eyewear divisions and continuity in their profitability potential need to be watched. With a stable margin outlook.

We retain BUY, with a DCF-based TP of Rs4,255 (implying 58.1x FY26E EPS). Risks: irrational competition from regional players; prolonged recovery in the economy, leading to lower demand for jewellery and rising gold prices.

Kotak Institutional Equities On Titan:

We raise FY2025-26E jewelry sales growth by 2% and reduce jewelry EBIT margin by 90-110 bps; net result: 5-8% EPS cut. We estimate a 17% consolidated jewelry sales CAGR over FY2024-27E, led by (1) a 15% domestic CAGR on ~9% store CAGR, (2) a 70% CAGR in international business and (3) a 30% CAGR in Caratlane.

We value TTAN at 60X June 2026E PE. The stock is priced for perfection; we would keep an eye on the adoption of lab-grown diamonds in India (and TTAN's studded share) and Aditya's Birla Group's upcoming jewellery foray.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.