Shares of Titan Company, late Rakesh Jhunjhunwala's biggest stock bet, climbed nearly 6 per cent in Friday's trade following the company's September quarter business update. Analysts said the market was factoring-in a muted growth for a few quarters, but an optimistic festive commentary should now drive an upgrade in consensus estimates for the jewellery maker.
The average price target on the stock based on 30 analyst estimates, for now, suggests a 6 per cent potential downside, publicly available data with Trendlyne suggests.
The jewellery division of the Tata Group firm saw 18 per cent YoY growth in September quarter on a high base that had elements of pent-up demand and spill over purchases of a Covid disrupted first quarter of FY22.
Titan Company said gold jewellery (plain) clocked low double-digit growth whereas studded sales were higher than the overall division, driven by good activations and better contribution from high value purchases.
Titan said the outlook for festive season continues to be optimistic and is visible in positive consumer sentiment across categories.
"The product-mix improved compared to last year but continued to be below pre-pandemic levels. Walk-ins grew in low double digits YoY with steady buyer conversions," Titan said post market hours of Friday.
The watches & wearables segment grew at 20 per cent YoY, clocking its highest quarterly revenue. Sales from Titan Eye+ stores saw healthy double-digit growth YoY. But that was offset by lower YoY sales across trade & distribution channel leading to an overall 7 per cent YoY growth for the division. Meanwhile, other businesses grew at 58 per cent YoY.
Following the development, the scrip climbed 5.8 per cent to hit a high of Rs 2,744.30 on BSE.
Jhunjhunwalas' biggest stock bet
Jhunjhunwala, who was fondly referred as ‘Big Bull’ and 'India's Warren Buffett', passed away at the age of 62 on August 14. While the September quarter shareholding data is yet to be out, Jhunjhunwala (3.98 per cent) along with his better half Rekha Jhunjhunwala (1.07 per cent) held 5.05 per cent stake in the Tata Group company as of June 30. At Titan's market capitalisation of Rs 2.42 lakh crore in early Friday's session, the duo's holding in the company was valued in excess of Rs 12,200 crore.
Analysts said earnings growth visibility for Titan Company remains strong, adding that it has compounded earnings by 20 per cent for an elongated 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," said Motilal Oswal Securities post the business update," Motilal Oswal Securities said in a note.
Motilal Oswal said Titan's runway for growth is long, with a market share of nearly 6 per cent. Unlike other high-growth categories, the competitive intensity from organised and unorganised peers in jewellery is considerably weaker, it said, adding te structural investment case for Titan is intact.
The brokerage has a target of Rs 2,970 on Titan.
"In our view, a strong Q2 and an optimistic festive commentary should drive an upgrade in consensus estimates, as the Street is currently factoring-in muted growth over Q2-Q4FY23 against our expectations of as much as 15 per cent growth," Emkay Global said.
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