Lok Sabha Elections 2019: Titan clocks new high on D-Street; has given whopping 311% return in 5 years - Should you buy?

Many investors made money and did profit booking on Dalal Street during Lok Sabha Election 2019. That said, even big bull Rakesh Jhunjhunwala saw ‘ache din’ in his favorite stock Titan Company. Notably, more than half of Jhunjhunwala's wealth is stored in this jewelry maker. And so far in 2019, Titan has already added hefty money in the ace investor’s portfolio. But it was the day of Lok Sabha 2019 elections counting, where Titan once again touched another high. The company’s shares clocked an all-time high of Rs 1,262.10 per piece in early hours of Thursday’s trading session. Having said that, in value terms Titan has made investors including Jhunjhunwala richer than before. If we look back in past 2014 election and uptill now then, Titan stock has given more than thrice the return on investments. 

Now that, Titan has touched a new high, did you know that this company’s stock was merely a little over Rs 300 a piece back in May 2014. In fact, the day of Lok Sabha 2014 election counting May 16, the stock was performing near Rs 306-levels. NDA government had come to power in 2014 with Narendra Modi as the PM.

While NDA government has once again grabbed power in India, the stock has given a whopping 311.30% return from May 16, 2014 to May 23, 2019. 

However, following the trend in benchmark indices, Titan also faced selling pressure in second half of trading session today. The stock finally ended at Rs 1,219.15 per piece down by 1.72% on Sensex. 

As on March 2019, Jhunjhunwala holds some 7.04% stake in Titan with 62,451,220 equity shares worth Rs 7,625.3  crore. 

Should you buy Titan ahead? 

Kotak Institutional Equities: 

Rohit Chordia, Jaykumar Doshi and Aniket Sethi analysts here said, “FY2019 was a good year for watches segment with 12% growth in volumes, 15% growth in revenues and 13% EBIT margin (an all-time high). Additionally, growth was broad based with key brands growing well. The management expects healthy growth to continue and flat to better margins in FY2020. Titan is focusing on both traditional watches as well as wearables segment. The new product pipeline comprises of (1) second version of ZF Reflex band (with capability to measure heart rate), (2) one more first-of-its kind wearable, (3) advanced adventure gear watch brand, and (4) foray into clocks with 25-30 SKUs.”

The trio added, “ Overall, Titan management’s unwavering confidence notwithstanding broad-based slowdown in consumption seems to suggest that the company has cracked the code to succeed across markets, jewelry sub-segments, store formats and independent of overall industry growth. Underpinning this confidence are underlying trends (1) steady market share gains from unorganized and small local jewelers, and (2) healthy SSG momentum in several large and mature stores and early success in smaller towns in middle India.”

Sachin Bobade, VP Research along with Nikhat Koor associate said, “ We believe the growth in jewellery segment will continue, despite an unfavorable base, due to new store additions and customer acquisition. Also, as Titan is one of the largest players in the organized industry with attractive products, we believe it will emerge as a winner of the shift from unorganised to organised. Further, the trend of buying jewellery for fashion, instead of investment, will enhance premiumization. We have revised our FY20E and FY21E EPS estimates upward to factor in increased demand. Maintain BUY, with TP of ` 1,245 (50x FY21E).”

Motilal Oswal:

Krishnan Sambamoorthy and Vishal Punmiya, Research Analysts here said, “ Due to the margin impact, resulting from higher anticipated store expansion (71 stores v/s 34 in FY19) and targeted sharp increase in exchange sales (up 35%) for the year, there is a slight reduction in FY20 EPS. But, due to better-than-expected targets for jewelry sales growth, there is a minor bump-up in FY21 EPS. For a business that has (a) the best top-line growth visibility in the large-cap FMCG/retail space (20% CAGR in jewelry, the largest segment, over the next four years); (b) prospects of continued EBITDA margins improvement because of high SSSG contribution and (c) sustained ROCE improvement from ~26% in FY19E to 34% in FY19, TTAN’s high valuations are fully justified. In fact, increasing doubts over topline and earnings growth of many consumer peers should also ensure high multiples for TTAN. Maintain Buy with TP of INR1,310 (targeting 50x FY21E EPS).”

Titan therefore, continues to be an appealing stock for investors.