Analyst Call Tracker: Why do analysts favour Titan even as investors lose interest in the stock?

Despite experiencing a recent dip, Titan Co, a major entity in the retail jewellery segment, continues to receive favourable ratings from analysts.

According to Moneycontrol's Analysts' Call Tracker, the number of "buy" calls for Titan has increased to 27 from 25 in the last quarter, while the number of "hold" and "sell" calls have fallen to three each from four.

The stock has long been a darling of the Street, but of late, things do not seem to be working for the company. Its popularity has been threatened by its subdued performance in Q3, competition from smaller entities like Kalyan Jewellers and an overall downturn in the consumer discretionary sector.

AK Prabhakar, Head of Research at IDBI Capital Markets & Securities, says that the rising competition, combined with aggressive pricing strategies, thanks to the one-nation, one-gold-price policy deployed by competitors like Kalyan Jewellers and Malabar Gold and Diamonds, coupled with their entry into the high-end jewellery segment, is the main reason for the decline in Titan's stock price.

Prabhakar also says that a slight correction in Titan's valuation towards Rs 2,000 could make it an excellent addition to investor portfolios. On March 13, shares of Titan Co settled at Rs 2,332 on the National Stock exchange, with a decline of around 2 percent from the previous close.

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Pan-India reach

Abhishek Jain, head of research at Arihant Capital Markets, has a more bullish outlook on Titan. He expects the company to maintain its position as the industry leader despite increased competition because of its pan-India market reach that other players lack.

Jain also believes that a correction in gold prices will attract buyers who have been previously on the sidelines, which will boost Titan’s revenue.

Counting that in, he expects Titan to continue to grow at a premium compared to its competitors like Kalyan Jewellers, Malabar Gold and Diamonds and PC Jewellers.

In addition to its growth potential in the traditional jewellery segment, Titan is also focusing on expanding its luxury sub-brand, Zoya. The company plans to more than double the number of Zoya stores over the next three years, with the hope that this expansion will help double the revenue from the brand. Presently, Zoya contributes Rs 200 crore to Titan's gross revenue of over Rs 40,000 crore a year.