Jewellery stocks have managed to hog the limelight amid the ongoing festive and wedding season. The recently concluded quarter has been yet another positive one for both Titan and Kalyan Jewellers.
Titan posted a 30.2 per cent year-on-year (YoY) jump in consolidated net profit at Rs 835 crore as against Rs 641 crore in the same quarter last year. Consolidated sales for the quarter jumped 18 per cent YoY to Rs 8,567 crore from Rs 7,243 crore in the year-ago period.
Kalyan Jewellers, on the other hand, reported a 54 per cent jump in its profit at Rs 106 crore as against Rs 69 crore in the same quarter last year. Revenue from operations jumped 20 per cent to Rs 3472.9 for the quarter ended September 2022.
Read more: Titan shares drop post Q2 results. Should you buy, hold or sell?
Titan Company, late Rakesh Jhunjhunwala's biggest stock bet, is up over 44 per cent since its July 2022 low. Shares of Kalyan Jewellers stock have zoomed almost 85 per cent from their May 22 lows.
"A lower-valued Kalyan Jewellers wins on the valuation front, but Titan has a stronger brand presence and scale. However, the consistency of profit generation by Titan is more attractive in an environment where cash is king," Sonam Srivastava, Founder at Wright Research told Business Today.
According to Anuj Jain, Research Head and Co-Founder at Green Portfolio, Titan is trying to diversify the business away from Jewellery which stands currently at 88 per cent of revenue – to Watches, Eye care and other businesses. Kalyan is still predominantly a jewellery player.
Centrum Institutional Research is sanguine on Titan’s operating performance led by strong pent-up demand across business segments. It noted Titan’s strategy revolving around serving millennials, meeting their aspirational demand with the introduction of new designs and channels, could pay richly.
"Further industry formalization showing up in market share gains for Titan at 6 per cent. The turnaround in the Caratlane, watches, and eyewear divisions and continuity in their profitability potential is not yet priced in. We maintain a positive view and expect stable gains in the margin. We introduce FY25E earnings and retain Buy, with a revised DCF‐based target price of Rs 3,115," it added.
For Kalyan Jewellers, ICICI Securities likes the developments on improving governance, commitment on the franchisee business, improving capital and investment discipline including divestment of non-core assets and plans to accelerate capital deployment outside south India.
It believes that a higher share of non-south revenues and increased studded sales are natural tailwinds for Kalyan’s margin profile and the benefit should continue to accrue for the next few years. The brokerage firm has retained its 'Buy' rating on the stock with a target price of Rs 150.
Factoring the beat in margins and the performance in festive, Nuvama Institutional Equities has increased FY23 EPS by 9 per cent and revised the target price for Titan at Rs 3,387.
It said that the margins in watches and Wearables were impressive at 15 per cent. Outlook ahead is also robust as, despite a strong base, Titan has clocked a 17-19% growth in major segments during the festive period (till October), it added.
HSBC initiated coverage on Kalyan Jewellers on October 3 with a 'buy' rating and a target of Rs 125. The brokerage firm said Kalyan plans to aggressively build out its jewellery stores in higher-margin markets outside its home base of South India. If executed well, this can trigger structural return on equity (ROE) expansion and result in a stronger earnings growth trajectory.
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