Titan Company gains 6% in two days; stock nears record high

With the past two day's rally, it has recovered 15 per cent from its recent low of Rs 1,401, hit on May 4, in intra-day trade

Shares of Titan Company were trading higher for the second straight day, up 3 per cent at Rs 1,614 on the BSE in intra-day trade on Wednesday. The stock has gained 6 per cent in the past two days in an otherwise range-bound market. In comparison, the S&P BSE Sensex was up 0.27 per cent at 50,775 points, at 10:05 am.

The stock was quoting close to its record high level of Rs 1,620.95, touched on January 6, 2021. With past two day’s rally, it has recovered 15 per cent from its recent low of Rs 1,401, hit on May 4, in intra-day trade.

On April 29, Titan reported robust sales growth of 61 per cent year on year (YoY) in the January-March quarter (Q4FY21) but operating performance was below Street estimates on lower Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins (down 250 basis points) due to a steep fall in gross margin. The company attributed the margin miss to weak revenue mix, higher coins & B2B sales in jewellery and impact of custom duty reduction.

Analysts at Emkay Global Financial Services expect near term impact due to Covid-19 restrictions, but a strong recovery in H2FY22 indicates pentup demand and market share gains. Besides, its initiatives to accelerate growth in the wedding segment may offset most of the loss in sales ahead. Jewelry margin performance should improve as studded sales recover on full unlocking. Turnaround of eyewear/caratlane and exit of loss-making JVs (Mont-Blanc/Favre Leuba) should also provide potential margin upsides.

Strong earnings run rate in H2FY21 offers visibility of the likely earnings recovery in FY22 on full unlocking. Titan remains our preferred pick in discretionary, offering a faster growth outlook, the brokerage firm said in result update. It maintains ‘buy’ rating on the stock with target price of Rs 1,725 per share.

“Though the near term may present a volatile demand scenario, we believe Titan is a structural growth story and appears to be a key beneficiary of the unorganised to organised shift in Indian jewellery market. Focus on market share gains and maintaining b/s strength (RoCE: 30 per cent plus) positions Titan as our preferred pick in the discretionary category,” ICICI Securities said in Q4FY21 result update.