PremiumOn the day when Titan announced its Q2 earnings, the company's stock was just a couple of rupees away from hitting its 52-week high of ₹2,790 on BSE. This Tata Group-backed company beats street expectations in September 2022 quarter by recording strong growth across most of the parameters. Titan is a dominator in the gems and jewellery segment. Its robust balance sheet along with the ability for strong execution of business has led Titan to outpace its peers. Not just that, Titan stock has recorded impressive gains on exchanges in the last five years. That being said, going forward, investors in Titan are in for a treat as the stock is predicted to reach new highs and most likely breach over the ₹3,200 mark between FY24-25.
In Q2FY23, Titan garnered a 33.7% rise in net profit to ₹857 crore compared to a profit of ₹641 crore in the same period a year ago. Revenue from operations jumped by 22% to ₹8,730 crore in Q2FY23 versus ₹7,170 crore in Q2 of FY22.
During the second quarter, Titan's jewellery business registered an income of ₹7,203 crore up by 18% yoy, while watches & Wearables business grew by 21% yoy to ₹829 crore. Meanwhile, the wearables segment posted an impressive growth of 246% to ₹88 crore. Further, the eye-care business registered a growth of 4% yoy to ₹167 crore, and that of other businesses comprising Indian dress wear and Fragrances & Fashion Accessories saw a growth of 59% yoy to ₹73 crore in Q2FY23.
As of September 30, 2022, Titan's retail chain (including Caratlane) has 2,408 stores across 382 towns with an area exceeding 3 million sq. ft.
Last week, on Friday, Titan shares closed at ₹2768.30 apiece up by ₹5.05 or 0.18% on BSE. The company's market cap is nearly ₹2.46 lakh crore.
Amnish Aggarwal – Head of Research, Prabhudas Lilladher said, "The strong momentum continues across all key business segments helped by network expansion and positive consumer sentiments."
"We believe that 1) Strong wedding jewellery demand and improved mix and benefits of network expansion 2) aggressive store expansion of 250-300 in eyewear and 3) acceleration in store openings in watches and 4) scale up in emerging businesses like Taneira and wearables will be major growth drivers for TTAN going forward," Aggarwal added.
Further, according to ICICI Direct's analysts, as guided by the management in its pre-quarterly update, the jewellery division (excluding gold bullion sale) reported robust sales growth of 18% YoY to ₹7,515 crore (impressive three-year CAGR: 27%). Watches division recorded its highest quarterly sales of ₹830 crore (up 21% YoY). Overall consolidated revenues (including gold bullion sale: ₹482 crore) grew 22% YoY to ₹9163 crore
Also, in a report, ICICI Direct highlighted that despite higher marketing & other expenses, improvement in share of studded ratio and positive impact of low cost diamond inventory led to EBITDA margins expanding 70 bps YoY to 13.6% (second highest margin). Absolute EBITDA grew 29% YoY to ₹1,247 crore (three-year CAGR: 34%).
On stock performance, ICICI Direct's note said, "Titan has been an exceptional performer in the discretionary space with stock price appreciating at ~30% CAGR in last five years."
Going forward, ICICI Direct continues to remain structurally positive on the stock as high growth visibility justifies premium valuations. They have maintained a Buy rating on Titan stock. It said, " introducing FY25E, we roll over our valuations and now value Titan at ₹3,240 i.e. 66x P/E on average of FY24-25E EPS (earlier TP ₹3,080)."
ICICI Direct in its report highlighted key triggers for future price performance in Titan. These are:
- Robust balance sheet and asset-light distribution model have enabled it to outpace peers in terms of store addition (to add 35+ Tanishq stores in FY23).
- Aspires to grow jewellery revenues by 2.5x by FY27 (implied CAGR: 20%). Huge headroom for growth with a current market share at ~6% in ₹4 lakh crore market.
- Thrust on wedding space is bearing fruit with wedding jewellery becoming a critical growth driver while its share in overall jewellery revenue has increased meaningfully.
- Gradual recovery in studded ratio to aid gross margins, going forward.
In a month, Titan stock has climbed over 7% on BSE. Meanwhile, the stock has climbed nearly 14% in a year. The stock was around ₹2,432 levels on November 4th last year.
Compared to its 52-week low of ₹1,827.15 apiece that was touched on July 1, 2022, Titan stock has skyrocketed by over 51% as of now. This strong upside is recorded a little over 4 months.
Late Rakesh Jhunjhunwala who was referred to as the 'Warren Buffett of India', was among the major investors of Titan stocks. His wife Rekha Jhunjhunwala as well. In fact, this Tata stock is the largest wealth creator in the Jhunjhunwalas portfolio. However, Jhunjhunwala passed away on August 14, 2022. But his estate including shares and property is passed on to his family. Titan continues to hold a larger part of Jhunjhunwalas' portfolio.
As per TrendLyne data, in Q2FY23, Rakesh's wife Rekha Jhunjhunwala increased its shareholding in Titan to 1.69% or 15,023,575 equity shares compared to the previous 1.07% stake or 9,540,575 equity shares. Rakesh's holding in Titan stands around 3.85% in Q2FY23 which is lower than 3.98% in Q1FY23. Together, the couple holds 49,200,970 equity shares or 5.5% in Titan in Q2FY23. By end of the June 2022 quarter, the couple's holding was around 5.1%.
Jhunjhunwala's net worth is around ₹35,140.58 crore in stocks --- of which --- nearly 39% of the wealth or around ₹13,672.2 crore comes from Titan stock, as per the data.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.