This Tata Group stock offers 23% upside potential as analysts upbeat on company's operating performance

Centrum Broking remains bullish on Tata Group’s watch to jewellery company Titan after its interaction with the company’s top brass as it reaffirmed its positive outlook for the company. Consequently, the domestic brokerage has retained its ‘buy’ rating on the counter with an upgraded target of Rs 4,337 (implying an upside of 23 per cent against the previous close) from the earlier Rs 4,243.  The company clocked 5-year revenue/PAT CAGR of 18.9%/20.3% led by Jewelry/ W & W/ Eye care at 20%/10%/7%. 

Titan’s future plans

In the jewellery division, the company aims to increase the market share to 10 per cent, by doubling the buyers at around 6 million on the back of rising per capita income and faster growth in Indian markets. The brokerage notes its growth strategy around consumer centric approach holds huge headroom in the wedding segment.

Despite rising gold prices management remains buoyant on sustainable growth momentum and guided for 15-20 per cent growth in revenues led by core and emerging businesses, noted the report.

In the watches and wearables segment, the company targets clocking 31 per cent share led by Women (Project Zeus) and Luxury segment (US $ 90bn market). With new strategy in place, Eye-wear segment targets to achieve Rs 2000 crore sales and 12 per cent EBIT margin in FY27 led by premiumization play in Sunglasses/lenses. 

Further, the company’s management retained its optimism to deliver sustained revenue growth of 15-20 per cent driven by, (1) leveraging synergy in channel expertise driving volumes, (2) focus on premium brands/formats, (3) higher investments in brands, and (4) deepen cost initiatives through War-on-Waste program. 

Operating margin to be held steady at 12.5 per cent

The brokerage is of the view that an enhanced product mix and operating leverage could hold operating margins at around 12.5 per cent and management is confident of realising the same on the back of, (1) improving product mix driven by uptick in contribution from high-value studded jewellery, (2) cost initiative program WOW 2.0 which is under implementation, (3) strengthening business moat in product sourcing, engineering and re-designing, and (4) synergy from consolidation of Caratlane business.

Valuation driven by future revenue growth potential

The brokerage remains upbeat on Titan’s operating performance led by strong demand across business segments yet its footing in the international market appears to be promising. The turnaround in the Caratlane, W & W, and eyewear divisions and continuity in their profitability potential need to be watched, added Centrum. 

Despite stable margin outlook, the brokerage has tweaked its FY25E/FY26E earnings by -1.5 per cent/+1.1 per cent. 

The report also added that company's growth engines are firing on all fronts, from robust store expansion to thriving segments like, (1) Designing contemporary, lightweight jewelry to evoke aspiration at ‘Tanishq’, (2) driving innovations in high-value studded and diamond jewelry through ‘Celeste’, (3) Prioritizing regional and community-centric approaches in wedding segment by ‘Rivaah’, (4) targeting Gen Z through digital media, especially via ‘Mia’, and (5) offering personalized experience with exquisite craftsmanship through ‘Zoya’.

Nonetheless, key risks cited by the brokerage to the upside potential are irrational competition from regional players; prolonged recovery in the economy leading to lower demand and rising gold prices.