Watches-to-jewelry maker Titan Company posted exceptional results for the June quarter of FY23 on the back of a low base as well as a recovery in consumer demand. The company reported a 13-fold jump in its year-on-year (YoY) net profit at ₹793 crore in June quarter as against ₹61 crore profit in the same quarter last year. On a sequential basis, the profit increased 61.5 percent.
Its total income for the quarter under review skyrocketed 199 percent YoY to ₹8,649 crore compared with ₹2,890 crore in the corresponding quarter last year.
One of the major investors in the Tata Group stock is Rakesh Jhunjhunwala, who together with his wife holds over 5 percent stake in the company as of June 30, 2022.
The Tata Group firm said its quarterly revenues were the second-best, buoyed by strong festive demand in a near normal Ql that came after a gap of two Covid disrupted periods.
"The financial year has begun well for us and we delivered a strong performance in Ql across our business segments. Despite the challenging macro environment, the outlook for the remaining quarters looks positive and we continue to execute our investment plans in India as well as chosen international geographies," said managing director CK Venkataranam post the earnings.
The Tata Group firm said that its jewelry business rose 208 percent YoY to ₹7,600 crore on the back of good Akshaya Tritiya sales Meanwhile, the watches and wearables business witnessed its best quarter ever in terms of sales, it added. The income for the business jumped 169 percent YoY to ₹785 crore.
Brokerages were also extremely impressed by Titan's results and retained their bullish stance on the firm. Some brokerages also raised earnings forecasts and target prices for the stock on the back of the robust earnings.
Domestic brokerage firm Prabhudas Lilladher raised the target price for the stock to ₹2,607 from ₹2,520 earlier) post Q1 results. It has an Accumulate for long-term gains rating on the stock.
The brokerage also marginally increased its FY23/24 EPS estimates by 3.7 percent/0.9 percent but cut its rating from buy to Accumulate post the 26 percent run-up in the stock price in the past 5 weeks, It believes the new launches in Taneira, wearables and Fastrack Prescription Eyewear can emerge as new growth drivers and that Titan is well placed to capitalize on long term growth opportunities.
“We estimate 33.82 percent PAT CAGR over FY22-24 and remain positive given the structural story on account of market share gains, strong balance sheet, franchisee-based model and strong brand. However, valuations at 57.3 times FY24 leave little room for re-rating,” said the brokerage.
Another brokerage house ICICI Securities maintained its 'buy' call on the stock with a target price of ₹2,800, indicating an upside of 14 percent.
“Titan has been an exceptional performer in the discretionary space with stock price appreciating at around 32 percent CAGR in last five years. We continue to remain structurally positive on the stock as high growth visibility justifies premium valuations and maintain ‘Buy’ on the stock,” ICICI Securities said in a report.
Meanwhile, Sharekhan noted that Titan is aiming to grow its revenue at a CAGR of over 20 percent over FY2022-27 on the back of its ambitious growth plan in the medium term. This along with consistent improvement in margins will help cash flows improve strongly in the coming years, it said.
The brokerage stated that FY23 will be a strong year for the company on the back of a low base in the core businesses.
"The company’s strong growth outlook, industry tailwinds in the medium term, and strong balance sheet make it the best play in the retail space. Hence we maintain our Buy recommendation on the stock with an unchanged price target of ₹2900," Sharekhan said in its report.
Meanwhile, brokerage house Macquarie has maintained an outperform rating on the stock with a target at ₹2,900 per share. The Q1 pointed to a healthy watch/eyewear margin, it said.
It also raised FY23/FY24/FY25 EPS estimates by 3 percent each to factor in margin strength as the Q1 reaffirms the resilience of Titan’s customer demand, pointed out the brokerage.
The stock has risen 37 percent in the last 1 year as against n 8 percent rise in benchmarks. However, it has lost around 3 percent in 2022 YTD. Just in July, the stock has recovered and surged over 21 percent, and continuing the trend it has added 4 percent in August so far.