Titan gains on favourable brokerage calls even after Q3 earnings miss

Titan shares have soared over 14 percent in the past three months.

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Titan Company traded higher on February 1 morning as brokerages retained favourable “buy” or “hold” calls on the stock after the jeweller and watch maker reported a jump in fiscal third quarter net profit and revenue but fell short of Street estimates.

The outperformance of the jewellery segment in a slow consumption environment, Titan's “best-in-class” execution track record and the management's positive outlook are the major factors driving optimism for the stock.

At 9.23 am, Titan was trading at Rs 3,653.10 on the NSE, nearly 1 percent higher from the previous close.

On February 1, the Tata group company reported a 9.5 percent on-year jump in net profit and a 20 percent jump in revenue to Rs 13,052 crore, but a 100 basis points contraction in its EBIDTA margin to 11.2 percent. Margin in October-December shrunk largely on account of weaker margins across segments, mainly the jewellery business due to competitive intensity given the gold price spike and marketing investments.

Motilal Oswal Financial Services has a 'buy' call on the stock with a price target of Rs 4,200. It pegged a 15 percent revenue CAGR for Titan with an EBITDA margin of 11-12 percent during FY24-FY26. "We will watch the near-term consumption trend but will continue to like Titan for its best-in-class execution track record and its hunger to keep expanding the user base. Consumers’ preference towards branded Jewelers will continue to keep the category growth rate at an attractive level," MOFSL said in a note.

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Nuvama Institutional Equities retained its 'buy' rating on Titan stock but raised the price target by 8 percent to Rs 4,106. The brokerage also increased its PE multiple target for Titan to 65x from 60x. Nuvama's raised targets are factor the potential international expansion.

Jefferies kept a 'hold' rating on Titan stock with a price target of Rs 3,600, mainly due to high valuation. Jefferies likes the management's confident outlook and its strong execution on growth through new store additions, launches, and international foray. While the brokerage remains positive on Titan's growth potential, it feels the current valuation of the stock leaves little room for a further upside.

Also Read | Titan Q3 results: Net profit rises 9.5% to Rs 1,040 crore, misses estimates marginally

Morgan Stanley retained its 'equal-weight' call on Titan with a price target of Rs 3,290. The brokerage also bought into the management's optimistic outlook.

Titan reported that its jewellery segment grew 23 percent on-year led by strong festive demand while watches and wearables increased 22 percent, well supported by the premiumization trend. Meanwhile, the company also added 18 stores of Tanishq and 15 of Mia by Tanishq in India during the quarter while the International store count stood at 14. The company also plans to increase its presence in International markets.

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