Rakesh Jhunjhunwala’s biggest stock bet may drop over 10% post Q4

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Shares of Titan Company declined over 1% in Friday’s early trade despite it posted an increase of 65.6% in its consolidated net profit at Rs 568 crore for the fourth quarter ended March 31, helped by strong growth in the jewellery segment. It had posted a net profit of Rs 343 crore in the same period last year.

The scrip traded 1.23% down at Rs 1,487 at around 9.58 am (IST), while the benchmark BSE Sensex was down 300 points, or 0.60%, at 49,466. Shares jewellery-to-watch maker is widely tracked by investors as ace stock picker Rakesh Jhunjhunwala holds more than a 5% stake in the company.

Titan’s total income during January-March 2021 increased by 58.87% to Rs 7,551 crore, compared with Rs 4,753 crore in the year-ago period. In an investors presentation, the company said this was “led by strong growth of 70% in jewellery division”. However, it also added that the base quarter (March 2020 quarter) was weak due to lockdowns in the second half of March.

The company’s revenue from the jewellery segment was at Rs 6,678 crore in the March 2021 quarter, up 71.27 per cent as against Rs 3,899 crore of the corresponding quarter.

Meanwhile, brokerage HDFC Securities has fixed a price target of Rs 1,300 for Titan, indicating a downside of nearly 13% from the current market price. “Titan’s relative market share gain (in the jewellery) doesn’t seem material as most big-box jewellers grew at a similar clip to Titan’s estimated 63% YoY. Jewellery margins stood at 10.7% against our estimate of 11.7%. Non-jewellery recovered around 98% of its base revenue, but disappointed in profitability due to higher e-commerce and lower margin product sales,” HDFC Securities said.

On the other hand, JM Financial retained a ‘Hold’ call on Titan with a price target of Rs 1,415. “Titan’s March quarter margin performance was disappointing across both jewellery and watches with mix playing a spoilsport for both the divisions. There is also an element of competitive intensity involved as far as the jewellery business goes. This could continue to drive needs for higher promotions and customer-acquisition costs in the business in the short term, with attendant impact on margin,” the brokerage said.

It further added that the near-term demand condition is also uncertain, with 50% of Tanishq stores closed for business for now, following the re-imposition of localised lockdowns in the country in recent weeks. “We believe the stock lacks trigger for the time being, especially since the market seems to have already priced in a lot of the good news relating to demand-recovery in the jewellery business,” JM Financial said.