- by Stocktry Expert
- 11th Apr 2021
Rakesh Jhunjhunwala's Top Prediction May Log 100% Profit Growth for the March Quarter
Titan Company’s quarterly earnings have impressed analysts, as Rakesh Jhunjhunwala-backed jewellery post 100 percent profit growth for the March quarter. Analysts see good prospects for the eyewear and the newly-introduced audio accessories segments, and retained or upgraded their targets on the stock post quarterly updates.
Prabhudas Lilladher suggests maintaining 'hold' with a new price target of Rs 1,663. It said an omni-channel strategy across jewellery, watches and eyewear segments will neutralise to some extent the impact of region-wise lockdowns and restrictions on operations.
In March quarterly, the brokerage expects Titan to log 100 percent growth profit at Rs 713.70 crore against Rs 356.80 crore reported for the year-ago quarter. Sales are seen rising 63.1 percent to Rs 7,224.40 crore from Rs 4,428.80 crore. Ebitda margin is seen falling by 40 basis points to 13.20 per cent from 13.6 percent YoY, but up from 11.8 per cent in December quarter.
“We expect 45 per cent volume growth in the jewellery segment on the back of a correction in gold prices, high demand of wedding jewellery and market share gains. While margins may taper off by 340 bps due to lower studded ratio and higher procurement costs before the custom duty increase. We expect a 12 per cent degrowth in watches. Watch out for commentary on operational stores and hours as well as demand scenarios due to lockdowns,” Prabhudas Lilladher said.
Rakesh Jhunjhunwala held 4.23 per cent stake in the Tata Group firm at the end of December quarter, while his better half owned another 1.09 per cent. Together, at Rs 7,273 crore, Titan is Jhunjhunwala’s biggest single stock holding.
Emkay Global said “While Maharashtra, a key market accounting for 15-20 percent of jewellery revenues, may see a short-term impact due to the lockdown, strong momentum in the jewellery segment and pent-up demand would drive further upgrades to our forecast,” it said.
"The stock trades at 47 times FY23 EPS. Titan remains our preferred pick in the discretionary space," the brokerage said and found the stock worthy of a price at Rs 1,650.
Emkay expects 87 per cent profit growth for Titan on a 59 percent projected sales growth. “Excluding B2B sales, we forecast Ebitda growth of 60 per cent to Rs 940 crore and PAT growth of 81 per cent to Rs 650 crore," it said.
Motilal Oswal said Titan's strong overall sales growth of 60 per cent year-on-year (YoY) for the March quarter and 70 per cent YoY growth particularly for the jewellery segment were far ahead of its expectations of 39 per cent and 48 per cent expansion, respectively.
“While margins would be impacted in the March quarter, this is largely on account of one-off factors. The margin outlook is expected to improve, unless a second round of restrictions disrupts business once again," it said and offered a price target of Rs 1,800 on the stock.
ICICI Securities said while the ratio of the company's studded jewellery has witnessed a healthy recovery on a sequential basis, it continues to remain below pre-Covid levels. Also, the higher share of gold coins in sales tends to drag overall margins, it said.
"Hence, we expect gross margins to decline 540 bps YoY to 25.1 per cent. Employee expenses are expected to increase by 19 per cent YoY. However, with positive operating leverage kicking in, we anticipate Ebitda margins to decline by 120 bps YoY to 11.8 per cent. On the back of a robust operational performance and high tax rate in the base quarter (nearly 33 per cent), we expect PAT to increase 69 per cent YoY to Rs 578 crore," it said while suggesting a target of Rs 1,830.
