In achieving this milestone, the one-time horologist became only the second company from the Tata Group to cross a valuation threshold earlier breached by Tata Consultancy Services (TCS). Titan is also the second company in the retail sector, after DMart’s parent Avenue Supermart, to surpass this benchmark.
The stock, which has witnessed a 26% surge in the past six months while overshadowing the 9% gain for the Nifty, is poised to sustain its upward trajectory and sustain its premium valuations, as the outlook remains robust.
“Titan has an impressive track record of outperforming its peers as well as exceptional long-term growth potential, all of which justify its premium valuations,” said Pratik Prajapati, analyst at Motilal Oswal Financial Services. “Titan’s healthy growth outlook, favourable industry trends, and a strong balance sheet make it a compelling option in the discretionary sector.”
Titan shares reached a record peak of ₹3,400 on Tuesday before closing 1.44% higher at ₹3,394. This surge coincided with a sharp increase in gold imports, reaching the highest level in 31 months. On Tuesday, the global brokerage CLSA upheld its optimistic stance on the stock, raising the target price to ₹4,029 from the previous ₹3,948 per share.The company has consistently delivered superior financial performance aided by the company’s strong brand recall, growing franchise across geographies, good product mix and favourable industry tailwinds. The stock is currently trading at 80 times its one-year forward earnings compared to its five-year average one-year forward PE of 60.12
According to Richard Liu, an analyst at JM Financial Services, Titan is to continue commanding a premium valuation, more so given the scarcity of ‘growth businesses’ in the space at this point.The stock has underperformed the benchmark Nifty during the 18 months ended March 31, 2023, by 1.5%. Since April 1, the stock has gained 35% compared with a 14% rise in the Nifty index.
Titan is one of the few consumer companies that has been growing revenue at this pace despite the high base and discretionary nature of its product segments. The gradual recovery in the studded ratio is expected to support improved gross margin in the future, said analysts.
“We expect the company’s performance to improve further as the share of the studded business improves in the overall jewellery segment, omnichannel strategy across jewellery, eyewear, and watches bear fruits and sub-brands such as Mia, Zoya, and Caratlane gain further acceptance,” said Manish Chowdhury, head of research at StoxBox.