Titan glitters for domestic brokerages, but foreign advisers would rather wait and watch

Foreign and domestic broking firms and analysts have taken a divergent view on the stock of Titan Company Ltd after the company’s rather dull first quarter numbers.

While Goldman Sachs and Morgan Stanley remain negative on Titan, most analysts working for domestic broking firms remain positive on the stock.

Shares of the company declined 5.3 per cent in early trade on Tuesday at ₹1,050.20 on the BSE, after the firm reported a consolidated net loss of ₹297 crore for the June quarter, impacted by lower income due to the Covid-19 pandemic. Total income declined 61.2 per cent to ₹2,020 crore (₹5,208 crore).

The stock recovered partially to end at ₹1,066.50, down 3.73 per cent over the previous day's close.

Goldman Sachs, which maintained a ‘Sell’ on the stock and a target price of ₹705, said discretionary purchases will remain under pressure. Similarly, Morgan Stanley too went ‘underweight’ on the stock with a target price of ₹807. “The Q1 earnings were weaker than consensus estimates and the macro and business headwinds will likely outweigh market share gain,” it said and added that full-fledged demand recovery will remain elusive in FY-2021.

However, for domestic brokerages such as Motilal Oswal Financial, ICICI Securities, Emkay Global Financial and Sharekhan, it's either buy or hold.

For Motilal, Titan is a buy with a target price of ₹1,300. Titan stands to gain from a favourable regulatory and operating environment for organised players and the ongoing travails of unorganised/organised peers in the Covid and post-Covid period, which will likely lead to accelerated shutdown of several players, it said.

According to Emkay Global, recovery in jewellery retail sales has been very strong, similar to trends witnessed after previous disruptions, and may continue to surprise.

Pent-up demand and pre-ponement of wedding demand have helped July sales. “While these may reverse, increasing normalcy will drive sequential improvement, in our view,”’ Emkay, which maintained a buy stance with a revised price target of ₹1,215 (earlier ₹1,100), said.

TItan is ‘Hold' for ICICI Securities with a target price of ₹1,108. I-Sec believes consumers will start accepting the high gold price and that could support volumes over the rest of FY21. Secondly, the ₹600-crore one-off bullion sale (4 per cent of FY21 jewellery revenues) indicates the ‘lost sales’. The long-term formalisation and market share gains narrative remains. However, ‘introduction of fixed making charges, even though a small proportion currently, is something that we will watch carefully,’ it added.

Sharekhan also retained its buy rating with a target price of ₹1,200, as it expects gain in market share, people shifting to a trusted brand and a relatively stable balance sheet.

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