Rakesh Jhunjhunwala's favorite stock is Titan; here's why you should invest in it too
Jhunjhunwala has recently increased his holding in Titan by 0.06% between July to September 2018. Simply put, even Jhunjhunwala knows that Titan is roaring lion in its sector ahead.
There are some 32 stocks that have won over ace investor Rakesh Jhunjhunwala, but it would not be wrong to say that the one nearest to his heart is Titan Company. Among the big bull's total wealth from his stocks, about half has been generated courtesy of Titan performance. The over 34-year old Titan Company is a dominator in jewelry segment both in terms of product presence and market valuation. However, 2018 would not be so great for the ace investor, as he only gained single-digit growth from Titan. But looking at the bigger picture, then Titan potential is definitely as big as its name suggests.
Now, that 2019 is just around the corner, Titan has been seen among the best players in Dalal Street going forward. This means Jhunjhunwala who is also referred to as Warren Buffett of India, is set to earn some money from Titan, getting even more richer. If you also want to avail the benefit of Titan, this is why you should invest in the company.
According to Stewart Mackertich, here are 8 reasons why Titan can become your money making magnet on stock exchanges:
Attractive gold exchange scheme: It offers a significantly lesser hair-cut as compared to other players with utmost quality assurance. It is targeting the revenue contribution from this program to reach 50% in next 2-3 years (currently ~30%).
Focus on wedding collection: With focus on wedding collection, company has introduced ‘Rivaah’ collection and is concentrating on
regional design collection to boost the revenue contribution from 20% to 50% from this segment.
Huge opportunities in cross selling: ’Tanishq’ has strong grip over the store level customer data which allows them to cross sell their other product like watches, eyewear & fashion accessories.
Surpassed the peers in higher margin studded segment: When the industry is going through flat to negative growth, Tanishq is maintaining
positive growth trajectory by their trendy design, strategic geographical presence (less store in south due to demand for lower margin product and stiff competition) and wide product range starting from INR7K.
Zero debt balance sheet and expansion through L2 & L3: Company has no long term debt in their books and is channelizing their efforts to open L3 category stores (asset light) in the cities where their visibility is low. The target is to increase the number of stores from 267 stores in 150 towns now to 400 stores in 250 towns in the next few years.
Key beneficiary of GST and Demo: After two major economic events like GST and demonetization, there has been a shift in buying behavior. Consumers are more comfortable purchasing jewellery from organized players because of reliability. Tanishq as a brand of Titan, has been the major beneficiary due to its stringent business policies, transparent exchange value and gold quality.
No working capital issue as compared to peers: Association with prestigious brand Tata group which helps them to manage hassle free working capital requirement like cash credit and gold lease.
Expecting higher contribution from SSG growth: SSG is likely to contribute 75-80% of jewellery sales growth, which is even higher than the 60% that it was reporting earlier. This will provide the traction to jewellery EBIT margin.
Following which, analysts at Stewart said, "We expect the company to achieve 18% CAGR in jewellery business over the next three years and the margin support through operating leverage will help them achieve an EPS CAGR of 23% . Factoring the above rational we assign a P/E of 45x on the FY21 EPS to arrive at target price of INR1065."
Today on Sensex, share price of Titan is trading at Rs 930.55 per piece above by nearly 1% at around 1513 hours.
On the day of 2018 year end, Titan gave only 7.67% return to Jhunjhunwala. But what is noteworthy is that, Jhunjhunwala has recently increased his holding in Titan by 0.06% between July to September 2018. Simply put, even Jhunjhunwala knows that Titan is roaring lion in its sector ahead.
Currently, the Dalal Street king holds about 63,251,220 equity shares which are worth Rs 5,845.4 crore. Hence, if you want a piece of equity make sure you know about Titan. Invest money wisely in equities.