Titan emerging as a lifestyle play, will sustain premium valuations: Analysts

Shares of Titan Co, the Tata Group luxury company, gained over 1 per cent in morning trade on May 4, 2023, on the back of a decent set of numbers for the March quarter. Most analysts covering the stock appear bullish on the company, with some raising target prices of the shares for the next 12 months. 

For instance, CLSA has maintained "BUY" on the stock and has also raised the target price to Rs 3,210 from Rs 3,150 earlier, citing "comprehensive growth across segments" and an optimistic outlook. Besides, the brokerage is also impressed by the company's Jewellery segment growth, which remained strong despite a soft March. A strong show in other businesses was another positive. 

Goldman Sachs echoes similar views. It has maintained "BUY" with a target price of Rs 3,175. It notes that Titan's jewellery business performance was strong; however, the watch & eyewear margins were weak. Management reiterates a medium-term growth trajectory of 20 per cent, which is encouraging. 

Among domestic brokerages, Prabhudas Lilladher has also given "BUY" with a target price of Rs 2,992. "We believe Eyewear and CaratLane have reached critical mass with FY23 EBIT of Rs 980 million and Rs 1.66 billion (96 per cent and 177 per cent growth) and will be a key growth driver in coming years. Titan is gradually emerging as a lifestyle play which will help sustain premium valuations. It currently trades at 49.3x FY25E EPS with a 20 per cent EPS CAGR over FY23-25. Retain Buy," wrote Amnish Aggarwal, Research Analyst at the brokerage. 

CATCH ALL THE LIVE MARKET ACTION HERE

Titan's 4Q standalone revenue growth of 33.4 per cent YoY was broad-based across all segments and reported a four-year CAGR of 20 per cent over Q4FY19. The strong momentum continues across all key business segments helped by strong network expansion and strong consumer confidence. "Miss on margins appears to have been as a result of higher gold bullion sales at Rs 10.55 billion (12.2 per cent of jewellery sales) against Rs 3.56 billion (5.8 per cent of jewellery sales) in 4Q22. We have a Buy rating on the stock with a TP of Rs 2,956," said JM Financial.

Motilal Oswal notes that Titan boasts of an outstanding track record that surpasses its peers, with superior short-term growth prospects, and exceptional long-term growth potential, all of which justify its high valuations, "We reiterate our BUY rating with a target price of Rs 3,080 (premised on 55xFY25E EPS)," the brokerage said in its earnings review note.