Rakesh Jhunjhunwala removes money from Titan: Has ace investor lost faith in his favourite stock?

For big bull Rakesh Jhunjhunwala the last three months of 2018 were quite busy as he aggressively removed money from few of his favorite stocks. But what was interesting to note was that, he even trim down his holding in his most precious stock - Titan Company. This jewellery dominator has been making crores for Jhunjhunwala, and a sudden cut in portfolio brings us to the question whether the ace investor has lost faith in this company. As the name suggests, Titan is actually a titan not only in its field but also in Jhunjhunwala’s stock list. Almost half of his earnings are from Titan’s gain. However, looks like sentiments have been reversed, and considering many idolize Jhunjhunwala’s pattern of investment the most common question now lies is whether Titan is a stock to buy.

Today, the stock price of Titan was trading at Rs 966.20 per piece down by Rs 10.15 or 1.04% at around 1031 hours on BSE.

Decline in share price of Titan can be partly attributed to the change in directors in the company. On Friday, Titan announced that, their independent director Prof. Das Narayandas has resigned from his post due to his increased preoccupation with his academic assignments at Harvard Business School. He further confirmed that apart from this, there is no other reason for his stepping off the Board . 

Meanwhile, Jhunjhunwala has cut his holding by 0.04% in Titan through his wife Rekha Jhunjhunwala’s portfolio. Rakesh manages both his and wife Rekha’s portfolio. With this trim, his overall holding stands at Rs 6,151.7 crore with 62,901,220 equity shares which aggregate 7.08% of Titan. 

In September 2018, when Titan along with major benchmarks was tumbling down, Jhunjhunwala interestingly decided to buy this jewellery stock by another 0.06%.

Notably, Jhunjhunwala has lost no money from Titan and it was one of the money making stocks for him by the end of 2018. In fact, Jhunjhunwala’s holding in Titan was worth between Rs 5,800 crore to over Rs 5,900 crore in last few days of December 2018, hence, one can believe that Jhunjhunwala made a profit booking. 

In 2018, CLSA said, “Titan was most volatile stock and had multiple moves of over 10% in either direction.”

According to TrendLyne.com data, Jhunjhunwala gains nearly 9% in Titan during that year. The start of 2019, has also kicked started on positive note with nearly 9% gain so far in January. In past three months, Titan has given nearly 22% returns to Jhunjhunwala. 

Titan continues to remain a top pick for investors. Phillip Capital sees this company to give nearly 44% return ahead. 

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For Q3FY19, Phillip says,  “Benefits of improved gold exchange programme, increasing salience from wedding /studded jewellery, and improved festive season to aid growth.  Gross margin to expand yoy because of inventory-related gains and higher share of studded jewellery.  EBITDA margin expansion to continue on operating leverage, improved SSS growth trends.”

Even analysts at Emkay believes a strong Q3FY19 result awaits from Titan, which makes it a top bet for investment in equities. Emkay said, “Expect a strong quarter with jewelry growth of 24% (vs. 16% in H1FY19), driven by market share gains from new collections and network expansion. EBITDA margins expected to be flat during the quarter, given a significant increase in ad spends in the watches division.”

Bharat Chhoda and Cheragh Sidhwa, Research Analysts at ICICI Securities said, “We anticipate H2FY19 revenue growth will be significantly better (vs. 17% growth in H1FY19) as Q3FY19 is predominantly expected to be driven by strong festive demand while Q4FY19 is expected to be supported by higher number of wedding dates. Capitalising on larger opportunities such as the wedding space (focus to enhance contribution from 35% in FY18 to 50% by FY23) and high value diamond studded jewellery has resulted in new customer addition and expansion of average ticket size.”

The duo added, “High asset turnover, coupled with positive operating leverage (driven by healthy SSSG) are expected to translate into 34% RoCE by FY21E from current 29%. We expect revenues and earnings to grow at a CAGR of 20% and 26% respectively, in FY18-21E. We reiterate our BUY rating on the stock with a revised target price of | 1065 (42.0x FY21E EPS).”

Thereby, Jhunjhunwala is well placed to get even richer in his Titan stocks. And, a marginal decline in holding should not make a difference to returns this company is set to give the Dalal Street king.