Stock Call on Rakesh Jhunjhunwala’s favourite share: Should you ‘buy’ or ‘sell’? Check target price

Titan Company Limited posted a strong Q3 performance Tuesday, that saw the company’s profit after tax jump 13 per cent, shares of the company were trading in green extending the gains made earlier in the week. Profit after tax for the third quarter stood at Rs 469.95 crore as compared to Rs 416.23 crore. According to the company, sales income during the third quarter grew by 9.4 per cent while sales income for the nine-month period ending December 2019 grew 8.2 per cent. Here’s what analysts at Emkay Global Financial Services suggest you do with the scrip.

On the back of strong profits from the jewellery business which grew by 10.6 per cent in Q3, Emkay Global Financial Services puts a ‘hold’ call on the share with an upside of 2.6 per cent. “Jewellery margins were slightly ahead at 13 per cent, reducing concerns on margins. Jewellery growth was muted in Jan’20 at 8%, affected by a further rise in gold prices and delayed activation,” said analysts at Emkay Global in a research report.

“Titan has been growing faster than its peers but a steep increase in gold prices and weak consumer sentiment may result in downsides to high growth expectations. Factoring in lower Q3 earnings, we cut FY21-22E EPS by 4%. At 46x FY22E EPS, the stock appears richly valued. Maintain Hold/UW in EAP with a revised TP of Rs1240, based on 45x Mar’22E EPS,” the report added. Key risks associated with the business of Titan, according to Emkay global, include demand postponement and delay in a pick-up in consumer demand.

Analysts fear that weak growth in trade will curtail the firms business. “Expansion pace in jewellery will continue to be strong, aiding growth, but expectations remain aggressive, which may see downsides. Moreover, weak growth in trade channels may continue to affect watches and eyewear performance, limiting overall growth,” said the report.

Sales of watches fell 3%, with volumes declining 10% due to weakness in trade channels and e-commerce. Titan, which is often dubbed as Rakesh Jhunjhunwala’s favourite stock jumped more than 7 per cent on Tuesday and extended the gains on Wednesday as share price edged up by 0.43 per cent to trade at Rs 1,280.95. Jhunjhunwala along with his wife holds more than 6 per cent stake in Titan Company Limited. His stake in the company is the largest of his more than Rs 15,000 crore investment portfolio.

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