Gold Price Analysis – Titan Share Price Hits Record High As Brokerages Cheer Q2 Recovery
Shares of Titan Co. hit a record after the nation’s largest branded jewellery maker’s sales rebounded across segments in the second quarter on pent-up demand and improving walk-ins.
Revenue across its jewellery, watches and wearables, and eyewear divisions grew in the bracket of 73-78% year-on-year, although on a favourable base, the owner of Tanishq brand said in an update ahead of the earnings for the quarter ended September.
The Tata Group company also said e-commerce sales for its watches and wearables, and eyewear divisions witnessed healthy growth, while walk-ins at malls and large-format stores recovered to 65% and 70% of the pre-pandemic levels, respectively.
Sales from its other business segments, which include its youngest brand Taneira, and fragrances and accessories, jumped 121% year-on-year.
Shares of Titan gained as much as 9.9%, the biggest jump since June of last year, to a record high of Rs 2,362 apiece on Thursday. Of the 33 analysts tracking the company, 21 have a ‘buy’ rating, eight suggest a ‘hold’, and four recommend a ‘sell’, according to Bloomberg data. The average of the 12-month consensus price targets implies a downside of 13.9%.
The stock has rallied 49.3% so far this year compared with a 26.1% gain in the S&P BSE Sensex. The scrip’s relative strength index is at 80, indicating that it may be ‘overbought’.
Here’s what brokerages made of Titan’s Q2 update:
Upgrades to ‘overweight’ with a target price of Rs 2,501, implying a potential upside of 16%.
A favourable macro backdrop combined with improved business fundamentals, as seen in the Q2 update, drive the shift in our view.
Valuation is high, but could be sustained given the revenue growth optimism.
Titan’s growth trends in Q2 surprised us positively with all-round growth across business segments.
Titan has outperformed the BSE Sensex, but underperformed its discretionary peers DMart and Jubilant.
Although 12-month forward P/E remains high relative to its own historical average, the premium relative to discretionary peers remains in line with the historical average.
Expects revenue growth for the jewellery division to pick up 25% in FY23 and EBIT margin to revert to 12.2% in FY22 and gradually improve in FY23 and FY24. There is upside to consensus earnings estimates, especially for FY22.
Rise in Covid-19 cases and resultant lockdowns, impact on consumer income, and volatility in gold prices, which could affect demand in the short term are risks to our call.