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Motilal Oswal Financial Services has issued a buy call on India’s leading consumer lifestyle company, for a potential upside of 23 percent. 

With a market cap of Rs. 3 lakh crore, Titan Company Limited has delivered positive returns of nearly 13.8 percent over the past year, but year-to-date returns have been negative by around 8.1 percent. Motilal Oswal analysts are optimistic about the jewellery sector, leading them to initiate coverage on Titan Company. 

The domestic brokerage has recommended a ‘buy’ rating on Titan Company with a target price of Rs. 4,150 per share, indicating a potential upside of nearly 23 percent from the current trading price of Rs. 3,378. 

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Motilal Oswal issued a ‘buy’ recommendation based on Titan’s superior execution history and robust competitive position in such a fragmented market. 

The brokerage has maintained a positive outlook on Titan for over ten years, and modelled a compound annual growth rate (CAGR) of 17 percent in revenue and 20 percent in EBITDA and 25 percent in net profit during FY24-26E for the company. 

Titan’s strong competitive positioning in insourcing, studded ratio, focus on the youth demographic, and strategic reinvestment has consistently positioned it ahead of other branded competitors. The brand’s strong recall and business moat make Tanishq’s competitive edge in its category difficult to replicate. 

As of March 2024, the number of Titan stores has grown to 3,035, signalling a robust expansion trajectory that remains intact. 

During fiscal year 2024, Titan’s EBITDA margin faced pressure due to a reduced studded mix. Monitoring the margin outlook will be crucial amidst increasing competitive pressures. 

Titan Company saw a 21.8 percent year-on-year increase in revenue from operations, climbing from Rs. 9,215 crore in Q4 FY22-23 to Rs. 11,229 crore in Q4 FY23-24. Additionally, after-tax profits grew by 4.7 percent from Rs. 736 crore to Rs. 771 crore, during the same period. 

The non-jewellery segment is expanding effectively and is expected to contribute to medium-term growth. Currently, this segment contributes 12 percent to revenue and 9 percent to EBIT. 

The jewellery sector has undergone significant formalisation, with the organised market now representing 36-38 percent of the total market, up from approximately 22 percent in FY18-19. 

The transition has been propelled by an 8 percent CAGR in total market revenue from FY19-24, reaching Rs. 6.40 lakh crore, and a more substantial 18-19 percent CAGR in the organised sector, the brokerage noted. 

However, analysts warn about significant risks, including volatility in gold prices, economic challenges in new markets, inefficiencies in capital deployment during rapid expansions, and pricing pressures arising from competitive dynamics. 

Titan Company Limited, a joint venture between the Tata Group and the Tamilnadu Industrial Development Corporation (TIDCO), is engaged in the business of manufacturing and sale of watches, jewellery, eyewear, and other accessories and products. The company’s operating segments are watches and wearables, jewellery, eyewear, and others. 

Written by Shivani Singh

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