Titan Company shares at Rs 3,080? What CLSA, others say on this Tata Group stock post Q3 biz update

All Sensex stocks, except Titan Company, were trading higher in Monday's trade. The Tata Group firm has come out with December quarter business updates, which seem to have disappointed investors, even as brokerages are upbeat on the company's prospects. A couple of brokerages find Titan worth up to Rs 3,080, which suggests a potential 25 per cent upside for the stock going ahead.

Titan Company reported a 12 per cent YoY growth in standalone business, with jewellery segment growing at 11 per cent YoY, Watches & Wearables at 14 per cent, EyeCare at 10 per cent and emerging businesses at 75 per cent. Titan Company said it continued to expand its network with 129 store additions for the quarter, taking its total store count to 2,537.

Following the development, the scrip fell 2.6 per cent to hit a low of Rs 2,470.70 on BSE. The scrip has risen 16 per cent in the last six months.

"Unlike staple companies, which signalled rural demand remaining subdued, Titan, which caters largely to urban customers, spoke about healthy consumer demand aided by a good festive season. We maintain our O-PF rating with a target of Rs 3,000," CLSA said in a note. 

With the scale-up of adjacent businesses and a sustainable business model, CLSA has ascribed 55 times PE to Titan's jewellery business. It values watches business at 20 times EV/Ebitda, eyewear at 10 times EV/sales, and ascribes 5 times EV/Sales for other initiatives.

Based on Titan's Q3 update, Street estimates for FY23 point to a 10 per cent growth in Q4, said Emkay Global, which had estimated growth of 20 per cent growth.  This brokerage has lowered its estimate for Titan to Rs 2,940 from Rs 3,000 earlier.

"With 9-10 per cent retail space addition, low base (Omicron/Gold price volatility) and incremental contribution from Mia/other categories, we see scope of upgrade in Street estimates. The strong network expansion continued, with addition of 111 net stores across segments (vs. 100-125 in recent quarters). With unusual gains of 100 bps in the base, higher competitive intensity and growth investments (Taneira/Intl.), we expect margins to decline 180 bps in Q3FY23," Emkay said.

Motilal Oswal said earnings growth visibility for Titan remains strong, adding that the jewellery maker has compounded earnings by 20 per cent for an extended period of time.

'In the jewellery industry, which is organising at a rapid space, it is clearly at the vanguard in terms of growth among organised players. Its runway for growth is long, with a market share of 6 per cent. Unlike other high-growth categories, the competitive intensity from organized and unorganised peers in jewellery is considerably weaker. The structural investment case for Titan is intact. We maintain our BUY rating with a TP of Rs 3,080," it said.

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