Titan has recently made headlines after the Tata Group's jewels to eyewear business passed the 3 lakh crore milestone on November 21. Titan's robust revenue and earnings growth in the September quarter, as well as its positive guidance for the coming quarters, have kept analysts optimistic about the company. Furthermore, growing gold imports, projected growth during the approaching wedding season, and the acquisition of a further interest in its subsidiary CaratLane have contributed to the profits.
Today, November 23, the stock reached a new high of 3,441.75 in intraday trading, extending advances for the seventh consecutive session since November 15. The stock gained 5% from November 15 and November 23. The stock has risen 13% in the last three months, compared to a 2% fall in the benchmark Sensex.
In the last year, the stock has outpaced benchmark indices, rising more than 31 percent versus the Nifty's gain of more than 8 percent. In contrast, the stock has gained more than 32% year to date in 2023, compared to a 9% increase in the Nifty.
So far this year, the stock has returned a profit in 8 of the 11 months. So far in November, the stock has gained about 8%, extending gains for the fourth consecutive month since August. It was, however, negative in July (-1.43 percent), February (-0.2 percent), and January (-8.5 percent).
However, over the long run, it has provided multibagger gains, soaring 195 percent in the last three years.
Earnings
Titan Company reported a net profit of 940 crore in the second quarter of FY24, up 9.7 percent from 857 crore in the same quarter last fiscal year. In Q2FY24, its standalone revenue from operations climbed 33.6 percent year on year to 11,660 crore from 8,730 crore. Ebit increased by 16 percent year on year to 1,392 crore, but Ebit margin fell by 90 basis points year on year to 12.8 percent from 13.7 percent in the previous quarter. Titan Company's jewellery segment's overall income increased 19% year on year to 8,575 crore.
"All of our consumer businesses achieved healthy growth for the quarter," stated Managing Director CK Venkataraman. The Watches and Wearables company has reached a significant milestone, with quarterly revenues of 1,000 crores or more. The jewellery industry continues to shine brightly, with consumer sales increasing by over 27% year on year. Store expansions in major markets are proceeding smoothly. We will continue to focus on increasing market share by providing innovative products to our customers that have a substantial impact on their daily lives."
Venkataraman also stated that the festive season in Q3 has begun well and that he is hopeful about the rest of the fiscal year's performance.
Is the stock a 'buy' right now? Take a look at this:
Fundamental Point of View
Prabhudas Lilladher: The company is rated 'Accumulate' by the brokerage, with a one-year target price of 3,300.
"We cut our standalone FY24/FY25 EPS estimates by 1.9 percent/3.5 percent because Titan will have to fund a portion of the 4,600 crore payout for Caratlane's 27 percent stake purchase." We feel that this acquisition is a step in the correct direction towards taking complete control of India's largest omnichannel player in the light jewellery market, with a presence in 233 stores. Titan will now own 98.28 percent of Caratlane, with the remaining shares held by employees under the ESOP system, according to PL.
Titan is also investing for future growth and presents a secular play on discretionary consumption, according to the brokerage, with a strong presence in jewellery (Tanishq, Mia, Zoya, and Caratlane), watches (Titan, Fastrack, and Helios), eyewear (Titan Eye+), and emerging in wearables, dress material (Taneira), and accessories.
"Demand trends in July remained strong across segments, giving us confidence that margins will improve in the coming quarters." Titan is trading at 60.1x FY25E EPS, with a 16.4 percent EPS CAGR from FY23 to FY25. We have set a SOTP objective of 128/share for Caratlane (up from 76 previously) and a DCF-based target price of 3,300 (3,172 for the standalone business and 128 for Caratlane) (3,240 before - 3,164 for the standalone and 76 for Caratlane). "Keep 'Accumulate'," PL added.
Motilal Oswal Financial Services: The firm maintained its 'buy' recommendation on the company, with a target price of 3,900, implying a 13 percent upside.
"Despite the rise in gold prices, management remains optimistic about the holiday and wedding seasons." Motilal Oswal claimed in its report that the company's other divisions, such as watches, wearables, and eyecare, "consistently delivered healthy performance." According to the brokerage, its advice to 'buy' the target is based on a 65x FY25E EPS. Furthermore, the brokerage has named the company its top pick in India's consumer discretionary category.
Titan reported a solid Q2FY24 performance, with EBITDA outperforming projections, according to Nuvama. Jewellery's EBIT margin of 14.1 percent (ex-bullion) was higher than their projection of 13 percent, which is encouraging, especially following the post-Q1FY24 concerns.
"We take the NCD-raise into account, value Caratlane separately, and raise the target valuation to 65 times (from 60 times) to account for the international opportunity, which will not be reflected in near-term earnings." While it is a little early, the greater multiple indicates a bet on Titan's execution," it said. Titan has given it a 'Buy' rating.
A Technical Perspective
SAMCO Securities Technical Analyst Om Mehra
"The primary trend remains bullish, and the stock is holding above the 3,350 breakout level." The stock could remain favourable as long as the weekly RSI remains above 60. Furthermore, the Breadth indicator indicates an increase in Balance volume, validating the script's positive volume flow.
The market has created a good base around 3,300 levels, while 3,510 will be the short-term resistance level, with a break above the same indicating further upside rallies," Mehra said.
According to the above technical indicators, long-term investors should hold, while new investors should wait for a slight downturn before entering, as the Bollinger band has grown significantly and will constrict in the coming days, according to Mehra.
Gaurav Bissa, Vice President of InCred Equities
"Titan has been in a strong uptrend since 2020, with a clear formation of higher highs and higher lows on weekly charts." The company has lately seen a minor consolidation breakout as well as an rsi breakout, which could propel the stock up to 3550 levels. "The stock can be held with a stop loss trailed to 3350 levels," Bissa remarked.
