Titan Stock Check: M-cap crosses ₹3 lakh crore; should you buy now?

Titan has been in the news lately after the Tata Group’s jewellery to eyewear brand crossed the ₹3 lakh crore mark on November 21. Titan’s strong revenue and profit growth in the September quarter and its healthy guidance for the upcoming quarters have kept experts bullish on the stock. Furthermore, rising gold imports, growth potential in the upcoming wedding season as well as its acquisition of an additional stake in its subsidiary CaratLane have added to the gains.

The stock hit its record high of ₹3,441.75 in intraday deals today, November 23, extending gains for the 7th straight session since November 15. In this period (November 15-23), the stock has advanced 5 percent.

In the past three months, the stock has surged 13 percent against a 2 percent decline in the benchmark Sensex.

The stock has outperformed benchmark indices in the last one year, up over 31 percent as against an over 8 percent gain in Nifty. Whereas, in 2023 YTD, the stock has added over 32 percent versus a 9 percent gain in Nifty.

The stock has given positive returns in 8 of the 11 months so far this year. Just in November so far, the stock has gained almost 8 percent, extending gains for the 4th straight month since August. However, it was in the red in July (-1.43 percent), February (-0.2 percent), and January (-8.5 percent).

However, in the long term, in the last 3 years, it has given multibagger returns, surging 195 percent in this period.

Earnings

Titan Company reported a net profit of ₹940 crore in the second quarter of FY24, registering a growth of 9.7 percent from ₹857 crore in the corresponding quarter of last fiscal year. Its standalone revenue from operations in Q2FY24 increased 33.6 percent to ₹11,660 crore from ₹8,730 crore, YoY. Ebit for the quarter rose 16 percent YoY to ₹1,392 crore but Ebit margin for the quarter contracted 90 basis points YoY to 12.8 percent against 13.7 percent in the year-ago quarter. Titan Company’s jewellery segment’s total income at ₹8,575 crore recorded an increase of 19 percent YoY.

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Managing Director CK Venkataraman said: "All our consumer businesses achieved healthy growth for the quarter. The Watches and Wearables business crossed quarterly revenues of 1,000+ crores, an important milestone in their journey. Jewellery business continued to shine well growing nearly 27% in consumer sales over the last year. The store expansions in key markets are progressing well. We retain our focus on improving market share by offering differentiated products to our consumers touching their everyday lives in a meaningful way."

Venkataraman added that the festive season in Q3 has started well and that he is optimistic on performance in the rest of the financial year.

Is the stock a ‘buy’ at this juncture? Take a look:

Fundamental View

Prabhudas Lilladher: The brokerage has an 'Accumulate' rating on the stock with a one-year target price of ₹3,300.

"We cut our standalone FY24/FY25 EPS estimates by 1.9 percent/3.5 percent as Titan will have to partly fund ₹4,600 crore payout for 27 percent stake purchase in Caratlane. We believe this acquisition is in the right direction for acquiring full control of the largest omnichannel play in the light jewellery segment in India with a presence across 233 stores. Post this acquisition, Titan will hold a 98.28 percent stake in Caratlane with a balance held by employees under the ESOP scheme," PL stated.

The brokerage also noted that Titan is investing for future growth and presents a secular play on discretionary consumption with 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.

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"Demand trends in July remain strong across segments, which gives us the confidence of pick up in margins over the coming quarters. Titan trades at 60.1x FY25E EPS with 16.4 percent EPS CAGR over FY23-25. We have assigned a SOTP target of ₹128/share for Caratlane ( ₹76 earlier) and assigned a DCF-based target price of ₹3,300 ( ₹3,172 for standalone business and ₹128 for Caratlane) ( ₹3,240 earlier – ₹3,164 for standalone and ₹76 for Caratlane). Retain 'Accumulate'," PL further stated.

Motilal Oswal Financial Services: The brokerage retained its ‘buy’ recommendation on the stock with a target price of ₹3,900, indicating an upside of 13 percent.

"Management remains optimistic about the festive and wedding seasons despite the upswing in gold prices. The company's other businesses, such as watches, wearables, and eyecare, also consistently delivered healthy performance," Motilal Oswal said in its report.

The brokerage stated that its recommendation to 'buy' the target is based on a 65x FY25E EPS. Additionally, the brokerage has identified the company as its top pick in the consumer discretionary sector in India.

Nuvama: The brokerage noted that Titan reported a strong Q2FY24 showing with EBITDA outperformance to estimates. Jewellery's EBIT margin at 14.1 percent (ex-bullion) was better than their estimate of 13 percent, which is comforting, particularly after the concerns post-Q1FY24.

“We factor in the NCD-raise, value Caratlane separately and increase the target valuation to 65 times (from 60 times) building in the international opportunity, which would not reflect in near-term earnings. While a little too soon, the higher multiple is a call on Titan’s execution," it stated. It has a ‘Buy’ rating on Titan.

Technical View

Om Mehra, Technical Analyst, SAMCO Securities

"The primary trend remains bullish and the stock is sustaining above the breakout level of ₹3,350. Till the time weekly RSI remains above 60, the stock could remain bullish. Also, the Breadth indicator suggests a rise in Balance volume, confirming positive volume flow in the scrip.

The stock has formed a strong base around ₹3,300 levels while ₹3,510 will be the short-term resistance level, crossing above the same can show more upside rally," said Mehra.

Based on the above technical parameters, long-term investors could hold, while fresh investors should wait for a minor pullback for fresh entry, as the Bollinger band has expanded much and would contract in the coming days, Mehra added.

Gaurav Bissa, VP, InCred Equities

“Titan has been in a strong uptrend with a clear formation of higher highs and higher lows on the weekly charts since 2020. the stock has recently witnessed a small consolidation breakout along with a breakout in rsi which can push the stock towards 3550 levels. One can hold the stock with stop loss trailed to 3350 levels,” said Bissa.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.