Shares of Titan Company jumped nearly 6% in intraday trade on BSE on October 7, eventually ending 5.27% higher at ₹2,730.50, extending the gains into the third consecutive session.
The stock witnessed traction a day after it released its September quarter business updates. For the second quarter of the current financial year (Q2FY23), Titan's jewellery segment saw an 18% year-on-year (YoY) growth. The watches & wearables segment saw a rise of 20% YoY while the eye-care segment grew 7% YoY. Other businesses saw a sharp rise of 58% YoY.
"The company witnessed healthy double-digit growth across most businesses with overall sales growing 18% YoY. The retail network continued the pace of expansion adding 105 stores (net) for the quarter. The outlook for the festive season (from Navratri at end Sep'22) continues to be optimistic and is visible in positive consumer sentiment across categories," said Titan in a BSE filing on October 6.
The stock has been on a gaining spree since July. It hit its 52-week low of ₹1,827.15 on July 1, 2022, on BSE and since then it has jumped 42% as of October 6 close.
Brokerages remain positive
Most brokerage firms are upbeat about the stock thanks to its strong show in the September quarter and bright growth outlook.
Brokerage firm Motilal Oswal Financial Services has a buy call on the stock with a target price of ₹2,970.
Motilal Oswal said Titan's earnings growth visibility remains strong. It has compounded earnings by nearly 20% for an elongated period of time.
"In the Jewelry industry, which is organising at a rapid pace, it is clearly at the vanguard in terms of growth among organised players. Its runway for growth is long, with a market share of about 6%. Unlike other high-growth categories, the competitive intensity from organized and unorganised peers in Jewelry is considerably weaker. The structural investment case for Titan is intact," said Motilal Oswal Financial Services in a report.
Emkay Global Financial Services, too, has a buy call on the stock with a target price of ₹2,700. The brokerage firm pointed out that Titan’s Q2FY23 business update suggests a robust three-year consolidated revenue CAGR of 24%.
Emkay expects an upgrade in estimates due to the company's healthy growth outlook.
"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 (versus our expectations of nearly 15% growth)," said Emkay.
Brokerage firm Centrum Broking, which has a buy call on the stock with a target price of ₹2,817, expects a continued uptick in Titan's revenues, as the demand is expected to be robust given the strong buying occasions such as Navratri at the end of September 2022.
"We believe the continued sales momentum across business divisions would have a positive impact on the organized Jewelry retail benefiting players like Titan. In addition, we expect strong demand momentum for watches and eyewear to continue given consumer mobility. We retain our earnings and maintain a 'buy, with a DCF‐based target price of ₹2,817 (implying 69.5 times FY24E EPS)," said Centrum.
Another brokerage firm Kotak Institutional Equities (Kotak Securities) has an 'add' call on the stock with a target price of ₹2,800. Kotak said Titan’s Q2FY23 update indicates 18% YoY growth in jewellery sales (recurring, excluding bullion sales) on a high base; three-year CAGR has accelerated to 27% in Q2 from 23% and 15% in Q1 and Q4 respectively.
Kotak highlighted that it had recently raised its FY2023E recurring jewellery growth estimate to 32% from 25% on the back of an encouraging demand environment and strong share gains and a further upgrade looks imminent.
"Given that the company is gearing up (positioning) for 20% YoY growth in the upcoming festive season, further upgrades to our estimates are imminent. Management has called out that the outlook for the festive season (from Navratri in end-Sep 2022) continues to be optimistic and visible in positive consumer sentiment across categories," said Kotak.
Technicals
On the technical front, the stock is trading near its crucial resistance zone of ₹2,750-2,800 and there is some sign of exhaustion. Analysts advise some profit booking at the current level.
"Volume is dropping as the price is increasing which is an anomaly with respect to volume price analysis. Weekly MACD is overstretched which is a sign of exhaustion. One can book some profits at the current levels and other higher levels (i.e ₹2,800) if achieved. Fresh buying as of now is not advised," said Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers.
According to a MintGenie poll, an average of 29 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
