Rakesh Jhunjhunwala Portfolio: This favourite stock of Big Bull sees a downside of 14% – know reasons here

The analyst at Ambit, a domestic brokerage firm, downgraded ace investor Rakesh Jhunjhunwala’s most favourite stock Titan Company to Sell with 14 per cent downside to a target price of Rs 2141 per share as the pent-up led demand would start to taper from the fourth quarter of the current fiscal.

Rakesh Jhunjhunwala, who is also termed as the Big Bull of the Indian stock market, has increased its holding in the company by 0.1 per cent to 4.9 per cent stake, which is 43,300,970 equity shares, as per the shareholding pattern. He has made the maximum investment in the company to Rs 10,386 crore, as per trendlyne.com.

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The Big Bull holds as many as 39 stocks publicly, along with his wife Rekha Jhunjhunwala and other associates with a company named Rare Enterprises.

According to the brokerage firm: “We expect revenue growth to moderate to 21/17 per cent in FY23/FY24 versus 31 per cent in FY22E. With near-term earnings already higher than consensus estimate (by 7-10 per cent) and long-term estimates already building in 16 per cent revenue CAGR over FY24-40E (implying 2x growth in jewellery market share from 4 to 12 per cent).”

The two key risks pointed out by the brokerage firm are “Increase in the pace of store expansion and better gross margins led by faster-than-expected improvement in the studded mix".

Ambit mentioned, “The majority of the delayed or pent-up demand has already been captured during H2FY21 (36 per cent growth over H2FY20) and Q2FY22 (62 per cent growth over 2QFY20).”

“We like Titan for its strong brand recall and large headroom to grow and gain market share in the highly fragmented (<5 per cent market share for market leader Tanishq) and unorganized (68 per cent) Indian jewellery market, the analyst at Ambit points out. 

This downgrading of Titan is mainly near-term basis, the brokerage says, however, on the long-term basis, the company’s jewellery growth would be propelled by: (a) gold exchange (33 per cent revenue share); (b) catering more effectively to channels, occasions and price points (c) accelerated store expansion of Tanishq; and (d) weakening of competition due to tighter regulatory norms.

(Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)