“While Titan’s execution has been on point, it has benefited from a sharp gold price rise over FY19-22. The lion’s share of this price tailwind seems to be over and most of the incremental heavy-lifting has to be volumeled, which could restrain growth rates in a slowing economy,” said
Securities’ analysts Jay Gandhi and Premraj Survase.
While maintaining its sell rating on Titan, the brokerage has given a DCF-based target price of Rs 2,050 per share, implying 46x Sep-24 PE.
Titan’s all-time high jewelry EBIT margin of 15.3%. Out of that, 200 bps is attributed to high diamond price-led gains and custom duty gains.
Kotak Institutional Equities cited 3 factors that makes Titan attractive for the long term – low market share in a large addressable market, wide gap versus competitors, and steady investments and progress on multiple fronts (customer base expansion, regional markets, wedding segment, international and high-value segment) that would enable market share gains for the foreseeable future.
The brokerage has increased its FY2023/24E EPS by 9%/4% and revised the SoTP-based FV to Rs 2,900, implying 57X December 2024E PE.
The stock, which has rallied around 8% in the last one year, is trading at a PE multiple of 71.4x (FY23E). “The stock’s near-term multiples appear expensive, but its long runway for profitable growth warrants premium multiples,” said while giving a target price of Rs 3,210 on the stock.
“Titan has a strong runway for growth, given its market share of sub-10% in jewelry 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, earnings CAGR has been stellar at 24% for the past five-years ending FY22. We expect this trend to continue, with a 31% earnings CAGR over FY22-24,” it said.
said on an adjusted basis, the margin performance may not look attractive, the same needs to be seen in the context of good consumer recruits, who typically buy staples jewellery first, and healthy store expansion.
“We believe jewellery hallmarking will likely create a level-playing field, driving further formalisation. Our optimism stays intact. This is one company where the capabilities to translate the opportunity to earnings is high, in our view,” said the brokerage which has a target price of Rs 2,950 on the stock.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)