Rakesh Jhunjhunwala’s favourite stock Titan Company has been downgraded by analysts at Ambit expecting revenue growth to moderate as pent-up demand starts to taper. “With near-term earnings already higher than consensus estimate (by 7-10%) and long-term estimates already building in 16% revenue CAGR over FY24-40E (implying 2x growth in jewellery market share from 4% to 12%), we see downside risk to current valuation of 77x/61x FY23/FY24 P/E,” Ambit said in a report. Titan share price has zoomed 54% this year to now trade at Rs 2,406 per share.
Sell now but long-term prospects intact
Ambit has downgraded the stock to a ‘Sell’ rating with a target price of Rs 2,141 per share. This implies an 11% downside from the current price of Rs 2,406 per share. However, despite the downgrade, the brokerage firm has said that it does not see any dent in Titan’s franchise in the long term except risks to near-term earnings surprise that is being built into valuations. Analysts added that investors should look for better entry points as near-term earnings surprises will be weak or limited.
Over the longer period, Ambit said that Titan’s jewellery growth would be propelled by; gold exchange, catering more effectively to channels, occasions and price points via Tanishq, Caratlane, Mia and Zoya, accelerated store expansion of Tanishq, and weakening of competition due to tighter regulatory norms.
Pent-up demand to fade?
Titan has benefited from the pent-up demand, seeing strong revenue recovery during the previous fiscal year and the first half of the current one. “We like Titan for its strong brand recall and large headroom to grow and gain market share in the highly fragmented and unorganized Indian jewellery market. However, we don’t believe current valuations are sustainable and hence downgrade Titan to SELL,” Ambit added.
Rakesh Jhunjhunwala’s favourite stock
Big Bull Rakesh Jhunjhunwala owns a 4.87% stake in Titan along with his wife Rekha Jhunjhunwala, according to data available on BSE website. This increased marginally in the previous quarter as both Rakesh Jhunjhunwala and his wife added shares of Titan. The total value of Titan shares owned by the big bull stands at Rs 10,390 crore.