Morgan Stanley retains equal-weight call on Titan, says margins will see downward pressure

Titan shares rose around 19 percent over the past year.

Morgan Stanley reiterated its equal-weight stance on Titan as the late Rajesh Jhunjhunwala-backed jewellery player is seeing downward pressure on margins.

The foreign brokerage has a target price of Rs 3,526 on the jewellery major, indicating an upside of 4.6 percent.

The management reiterated the long-term opportunity and the strategy for the jewellery business. A key focus will remain driving market share higher from the current levels of eight percent. Titan will be prioritizing investments to drive growth.

As the jewellery market is becoming more crowded with new players, there could is downward pressure on margins.

At 9.30 am, Titan shares were quoting Rs 3,386.5 on the NSE, lower by 0.7 percent compared to the previous session's closing price.

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In an interview with CNBC-TV18, the firm's management said, “Over the next three years, easily we can add about 100 plus stores in Tanishq, we can add about 150-200 stores in Mia and certainly a 100 plus to 250 stores in CaratLane. In totality, the opportunity to add 300-400 stores is very comfortable.”

On the eye-wear front, Titan is targeting over 20 percent CAGR in the next years.

Titan reported a standalone net profit of Rs 786 crore for January-March quarter, a growth of 7 percent on-year. However, a Moneycontrol poll had pegged the profit to rise 10.5 percent on-year at Rs 811 crore.

The jeweller and watchmaker's revenue came in at Rs 10,047 crore, rising 17 percent on-year, the company said in a regulatory filing.

Over the past year, Titan shares underperformed the benchmark Nifty 50, rising around 19 percent while the frontline index gained around 25 percent during the same time period.

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