Buy Titan Company, target Rs 1,105: Motilal Oswal Securities

Motilal Oswal Securities has a buy call on Titan Company with a target price of Rs 1,105.

The current market price of Titan Company is Rs 912.60.

Time period given by the brokerage is one year when Titan Company price can reach the defined target.

Investment rationale by the brokerage:
In an encouraging sign, wedding season demand is scaling up well for TTAN. This should uplift management confidence as it had guided for healthy growth (25-30 per cent) for 3QFY19 but refrained from commenting on the fourth quarter performance. In our view, if consumers continue flocking to its stores in the wedding season, Jewelry sales growth of 25 per cent for the full year is achievable (note that TTAN had guided for Jewelry sales growth of 25 per cent at the start of the year but lowered it to nearly 20 per cent later).

SSSG is likely to contribute 75-80 per cent of Jewelry sales growth, which is even higher than the impressive 60 per cent that it reported earlier. This, in turn, would have extremely positive implications on Jewelry EBIT margin.

Sustained growth in the Watches segment (where visibility is high for the near term, but somewhat unclear for the longer term) can prove beneficial, as EBIT margin in this segment is 300-400bp higher than that in Jewelry.

Jewellery business growth prospects remain robust, and now Watches and even Eyewear segments have raised their hands to contribute to growth. We believe that premium valuations are fully deserved for a business that has perhaps the best revenue growth potential in the largecap FMCG/retail space (20 per cent CAGR in Jewelry business over the next five years) and also operating leverage-led margins support. We maintain our Buy rating on the stock with a target price of Rs 1,105, based on 47x Dec20 EPS (nearly 10 per cent premium to three-year average P/E).

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