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Titan stock drops after foreign brokerage downgrades

Shares of Titan is trading lower on the NSE after the foreign brokerage firm CLSA downgraded the stock to Sell.

CLSA downgraded the stock to Sell and cut the target price to Rs720 from Rs1,050 amid growth concerns after the company missed Q1 guidance, as per media reports.

The company has better fundamentals but uncertainty will weigh on the stock, CLSA said. The brokerage house downgraded the rating from Outperform to Sell.

Titan Company Ltd is currently trading at Rs816.40 down by Rs8.1 or 0.98% from its previous closing of Rs824.50 on the BSE.

The scrip opened at Rs812.10 and has touched a high and low of Rs818.50 and Rs788.15 respectively.

Titan Company Limited (Titan) is India’s leading producer and retailer of watches, jewellery, eyewear and accessories. We expect revenue CAGR of 20% over FY18-20E aided by (a) regulatory relaxation in jewellery business (withdrawal of Prevention of Money Laundering Act) and (b) GST rate cut on watches and sunglasses (from 28% to 18%). Titan intends to add 30 stores in FY19E. We expect that the company’s foray into high margin studded jewellery market will drive PAT CAGR of 25% over FY18-20E. We expect ROE to expand by ~700bps to ~25% by FY20E. Stock trades at 40x FY20E EPS.

As of Q1FY19, Titan had retail footprint of over 1,600 stores and total retail area of over 2mn sq ft. Jewellery segment contributed ~82%, watches ~13% and eyewear and other accessories ~3% to the top-line in FY18. Titan had ~496 World of Titan stores, ~173 fastrack stores, ~262 tanishq stores, ~509 Titan eyeplus stores and ~72 Helios stores as of Q1FY19. It has presence in ~276 towns in India and ~33 countries overseas.