Titan share price plunges for 5 days in a row. Should you buy or sell?

Titan is a large-cap stock and holds a leadership position in the gems and jewellery segment.

On Tuesday, Titan’s share price dipped by ₹15.90 or 0.64% to end at ₹2,467.30 apiece on BSE. Its market cap is over ₹2.19 lakh crore. The downside in Titan shares is at a slower pace compared to the over 2% drop on Monday. Titan has been among the top underperformers on exchanges this week.

In two trading sessions this week, Titan shares have slipped nearly 3% on Dalal Street. But the stock has been in red since January 4th. In five trading sessions, Titan stock has plunged nearly 5%. The last time Titan stock was above ₹2,600 mark was on January 3rd.

Late market mogul Rakesh Jhunjhunwala’s wife Rekha Jhunjhunwala is among the largest public investors in Titan stock. Jhunjhunwalas added Titan to their portfolio in December 2015. However, Rakesh passed away on August 14, 2022. But his estate including shares and property is passed on to his family. His wife Rekha Jhunjhunwala has been diversifying his and her stock portfolios since then.

Titan is the largest company in Jhunjhunwalas’ portfolio in terms of valuation. As per Trendlyne data, Rekha Jhunjhunwala’s holding in Titan is around ₹12,144 crore as of January 10.

Titan shares slipped drastically after its December 2022 quarter updates on January 6. In Q3FY23, the company posted standalone sales growth of 12% YoY. On segment-wise performance, jewellery business registered 11% YoY growth, watches & wearables posted 14% YoY growth, while eyecare and emerging business garner 10% and 75% year-on-year growth.

The company added 111 new stores in Q3FY23 — taking the total count to 2,362 stores so far in FY23.

In its filing, on the Q3 performance, Titan said, the healthy consumer demand spurred by a vibrant festive season resulted in 12% growth in combined sales YoY across Company’s standalone businesses. The positive consumer sentiment helped all categories clock healthy double-digit growths despite a high base in the same period of last year.

Should you invest in Titan shares? 

Post Q3FY23 data, Centrum said, “We believe the continued sales momentum across business divisions would have positive impact on the organized Jewelry.”

Centrum’s note added, “in line with our thesis as argued in our report, we expect continued strong uptick in revenue, as the demand is expected to be robust in going forward. We believe the continued sales momentum across business divisions would have a positive impact on the organized Jewelry retail benefiting players like Titan.”

Additionally, Centrum added that “we expect strong demand momentum for Watches and Eyewear to continue given normalized consumer mobility. Further turnaround in the Caratlane, watches, and eyewear divisions and continuity in their profitability potential not yet priced in.”

Centrum remains positive on growth prospects for Titan and retains Buy with DCF-based TP ₹3,115 (implying 64.8x avg, FY24/25E EPS).

Further, ICICI Direct believes that Tanishq has effectively fine-tuned the success template in Chennai / Tamil Nadu, which the brokerage believes is a replicable template in other southern states.

It said, “Tanishq has been able to meaningfully sharpen its competitive edge by becoming aggressive on price and inventory offering compared to top regional competition. This has helped it improve business (customer footfalls/revenue) by c. 1.5x. South has always been a competitive market for Tanishq due to (i) highly competitive dominant organised jewellers and (ii) relatively weak regional offerings by Tanishq.”

However, ICICI Direct’s note also added that “its fine-tuned strategy of (i) matching gold rate with competition, (ii) offering 100% exchange value to customers on 22kt and above gold bought from any jeweller, (iii) benchmarking making charges with top regional competitors, (iv) regionalisation of store inventory and (v) roping in Nayanthara (moviestar) as a brand ambassador, appears to be a successful recipe. We believe this model could be replicated to other regions in South India.”

That being said, ICICI Direct’s note added, “our optimism stays intact. This is one company where the capabilities to translate the opportunity to earnings is high, in our view. Key risks: Sustained weakness or worsening of macro environment can lead to some slowdown, which has not been factored. ADD.”

ICICI Direct’s target price is set at ₹2,800 per share on Titan with an ‘Add’ recommendation.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.