Rakesh Jhunjhunwala’s bittersweet stocks! Tale of two shares - Titan and DHFL

There is opposite trend in ace investor Rakesh Jhunjhunwala’s portfolio, where one stock continues to make him rich and other poorer. The stock market has remained volatile, but nothing that fragile has been witnessed than the ones in Dewan Housing Finance Corp (DHFL). This NBFC has become the disappointing stock in Jhunjhunwala’s portfolio, as he loses massively. It took just a span of 5 months, for DHFL to turn its glorious performance of near Rs 690-level, to a peanut stock of Rs 97 per piece. The losses can be believed to be massive in Jhunjhunwala’s wealth. On the other hand, one stock that has remained consistent multibagger for Jhunjhunwala would be his favorite stock Titan Company. This week, where Titan made a new high, DHFL touched a new low. These two have showed the altogether different performance in Jhunjhunwala’s portfolio. 

A tale of two stocks! Which one should you buy?

On Tuesday’s trading session, the stock price of DHFL has jumped over 6% with an intraday high of Rs 123 per piece. At around 1424 hours, the stock was trading at Rs 119.90 per piece up by 3.81% on NSE. 

But did you know that, the stock has clocked an all-time low of Rs 96.80 per piece on NSE. With this bloodbath, it needs to be noted that, now DHFL has plunged by a whopping 86% in just six month, as it was only on September 03, 2018 where it witnessed an all-time high of Rs 691.5 per piece. This also reveals that, Jhunjhunwala has seen heavy money loss in DHFL. 

Over the last 4 months, there has been a broader correction in markets and especially midcap space & NBFC space, triggered by the IL&FS crisis amongst other things. DHFL had also corrected sharply.

However Angel Broking firm said, being a 1) “AAA” rated company with 2) Deloitte as auditor, & 3) tightly regulated by RBI/NHB, 4) public deposit taking company having large number of reputed banks/MFs as lenders, and 5) major institutions as shareholder. Therefore, the reasons for correction were uncertain.

Jhunjhunwala trimmed his holding in DHFL by 0.73% in Q3FY19. Now he has about 2.46% stake in DHFL with 7,728,500 equity shares worth Rs 88.9 crore.

Coming back to Titan, just like its name this jewellry stock has been making Jhunjhunwala richer than before. Notably, Titan accounts for almost half of Jhunjhunwala’s wealth, hence, it is rise and fall of this stock which will make difference in his wealth. 

Titan on NSE, has surged over 4% after clocking an all-time high of Rs 1,068.50 per piece today. However, the company is currently trading at Rs 1,064.80 above Rs 39.05 or 3.81%. The upbeat in Titan is due its December 2018 (Q3FY19) result announcement. 

With this blockbuster performance, Titan has now rocketed nearly 46% in just 4 months. It was on October 09, 2018, when Titan saw a new low of Rs 732.30 per piece on NSE. 

That said, Jhunjhunwala’s wealth in Titan now stands at Rs 6,444.2 crore with 62,901,220 equity shares account 7.08% of the company capital. The ace investors wealth was near Rs 5,800 crore to Rs 5,900 crore in last month of 2018. Such earmarks as a success story of Titan and Jhunjhunwala. 

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Which stock should you buy?

On Titan, Manoj Menon and Vismaya Agarwal analysts at ICICI Securities said, “We raise our earnings estimates slightly building strongerthan-expected margin expansion; modelling revenue / EBITDA / PAT CAGR of 20% / 27% / 24% over FY19-21E. We maintain BUY with DCF-based revised target price of Rs1,150 (earlier Rs1,100). At our target price, the stock will trade at 49x P/E multiple Sep-20E.”

The duo added, “Titan's 3Q (Jewellery, Watches revenue +37% and +19%) confirms that bottom-up execution and market share gains trumps over macros in Discretionary (Disc.). 3Q performance of Disc. businesses (Asian Paints, Havells, Jubilant and Titan) somewhat allays the concerns about an all-round slowdown which was feared after observing the slowdown faced by Maruti (I-Sec analyst Nishant Vass rates it SELL). Jewellery revenues are tracking the guidance of 22% for FY2019 (partly aided by Rs2bn institutional order for gold coins in 3Q). Jewellery EBIT margin expansion of 250bps yoy confirms mix improvement story in plain gold is intact.”

While Pratim Roy, analysts at Stewart Mackertich said, “We expect the company to achieve 22% CAGR in jewellery business over the next three years led by gold exchange, increasing contribution from wedding collection and the margin support through operating leverage. Their eyewear, fragrance, & saree business also looks promising in near term. Factoring the above rationale we are assigning a P/E of 49x on the FY21 revised EPS to upgrade our price target from INR1065 to INR1140.”

Alok Shah and Abneesh Roy, analysts at Edelweiss Securities said, “We envisage Titan to extend its growth run led by market share gains, rising share of studded jewellery, new launches and retail expansion. Margin expansion levers such as higher share of studded (jewellery), in-house frame manufacturing (eyewear), cost optimisation and operating leverage are in place. Rolling forward (June 2020), we assign 55x PE multiple (earlier 50x) to arrive at revised TP of INR1,182 (earlier, INR990). We maintain ‘BUY/SO’. At CMP, the stock is trading at 48.9x FY20E EPS.”

Meanwhile on DHFL, Angel Broking firm has given neutral coverage on the NBFC. On the other hand, Geojit has dropped its coverage for the company. 

Geojit said, “Owing to changes in our coverage universe, we are discontinuing coverage on DHFL. We had a Buy rating on the stock with a target price of Rs661 as per the report dated 25 th October 2017. As on date of this report, our recommendation is no longer valid.”

However, Edelweiss and Motilal Oswal has given a buy rating on DHFL. In Motilal Oswal’s view, DEWH is a focused play on low-ticket housing. While the company had been gaining traction in core affordable housing loans, it opportunistically diversified into non-retail loans over the past few years. However, this is expected to normalize and DEWH is likely to focus on its core strength of being a low-ticket affordable housing financier. Maintain Buy with a TP of INR300 (0.8x FY20E BVPS).

In Edelweiss view, “as core earnings witness a dip and RoEs also remain <13% by FY21E, valuations will be capped at 0.9x P/ABV and hence, we are not revising our target price. Maintain ‘BUY’ with a TP of INR277.”

Well one can be sure that Titan is one of a kind in its segment, and is placed well in terms of growth ahead. On the other hand, DHFL is a bit crucial matter for Jhunjhunwala, if the volatility continues.