Tata group-controlled jewellery maker Titan Company Ltd has a strong runway for growth in the consumption space in India, with robust earnings growth visibility and compounding for the long term, domestic brokerage house Motilal Oswal said in its latest report.

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Given its sub-10 percent market share in jewellery and the struggles of unorganised and other organised peers, Motilal sees a promising growth outlook for Titan.

The brokerage has a 'Buy' rating on the Titan stock and a target price of Rs 3,570, which indicates an upside potential of 13 percent from the current market prices of Rs 3,173 per share.

While the recent run-up in gold prices has led to near-term postponement of demand, Titan has historically performed well when gold prices surged.

During 2008-13, when gold prices went up by a 24.8 percent CAGR (compound annual growth rate), Titan's jewellery EBIT and overall PAT clocked a CAGR of 49.7 percent and 35.6 percent, respectively. During the same period, its share price saw a 32 percent CAGR. Since its making charges are based on the percentage of the value of gold, the margin will improve after a lag, Motilal said.

Titan's medium- to long-term earnings growth opportunity is best-of-breed, reflected in five-year sales, EBITDA and PAT CAGRs of 20.3 percent, 24.3 percent, and 23.9 percent, respectively.

Titan shares were trading nearly a percent higher at Rs 3,185.95 apiece on the NSE on Friday, September 8.

The stock, in which investor Rekha Rakesh Jhunjhunwala has a stake, rallied 33 percent in the past six months. On a year-to-date basis, Titan shares have gained 24.16 percent and are up 21.33 percent in the last one-year period.

Rekha Rakesh Jhunjhunwala holds a 5.36 percent stake, representing 47,595,970 equity shares in the Tata Group company.

Technically, the 14-day relative strength index (RSI) of the counter stood at 70.7, indicating it's trading in the overbought zone. This implies that the stock may show a pullback. Titan shares have a one-year beta of 0.7, suggesting very low volatility during the same period.

The counter is trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

First Published:Sept 8, 2023 11:49 AM IST