- by Stocktry Expert
- 30th Mar 2021
Titan Co Stocks can Hit a near High Record in 6-weeks, on an Improved Outlook
Titan company shares hit a near high over six weeks, of Rs. 1,562 and went up by 4% on the BSE on Tuesday. They got a healthy revenue growth on the front of continuously expanding their store network and presenting lots of opportunities owing to their large share of unorganised sector in the industry.
The stock has been trading at its highest since the 11th of February 2021 and is only 4% away from hitting its all time peak of Rs. 1,621, which happened on the 6th of January 2021. In the last one month, Titan has outperformed in the stock market by gaining 11% as opposed to 1.2% rise in the S&P BSE Sensex. Im the last year, Titan stocks have risen by 65% as opposed to 75% in the benchmark index.
The jewellery segment of Titan is expected to drive growth in revenues and accruals. This segment showed high resistance against the Covid-19 crisis and reported a 16% year on year increase in the October to December quarter.
"The rating agency changed the long term rating of AA+ to AAA on March 15th this year. Besides, it also reassured the short term rating and fixed deposit programme. This reflects that Titan will be able to leverage strong bands and market leadership position in the jewellery segment and drive sustainable growth in revenues and accruals.", said Icra.
Meanwhile, Titan’s jewellery segment expanded healthy revenue at a compound annual growth rate (CAGR) of 18.7% and margin expansion from FY16 to FY20. This was helped by improvement in market share and additions to the store network.
Analysts say, "Growth prospects in the jewellery segment are underpinned by large industry size and fragmented market shares.". Increasing regulatory restrictions in the jewellery segment have led to transparency and higher compliance costs. This has resulted in a significant churn in the unorganised segment, thus being advantageous to organised players like Titan.
"The company has a robust financial profile with strong cash accruals, moderate capital expenditure requirements, comfortable leverage metrics and strong liquidity," Icra said.
Titan's 'War on Waste' programme focuses on tight control on inventory position and higher focus on gold on lease replenishment (forming around 56% of inventory). Analysts at ICICI Securities said in Q3FY21 results update, "We expect initiatives to improve cash positions and significantly enhance RoIC (from 31 per cent in FY20 to around 42 per cent in FY23E)".
The brokerage firm builds a CAGR of 14% and 22%, respectively in FY20-23E, in revenue and earnings. It said, "Healthy balance sheet, sustained focus on market share gains and better earnings visibility prompts us to upgrade from HOLD to BUY with a revised target price of Rs 1,830."