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    Jhunjhunwala's biggest stock holding divides analysts on recovery outlook

    Synopsis

    Analysts said the recovery so far has been in line with expectations, but the outlook uncertain.

    The company said almost all of its manufacturing operations have commenced operations, but production levels for now are low, given the inventory situation.

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    NEW DELHI: Shares of Titan Company, biggest stock holding of ace investor Rakesh Jhunjhunwala, traded sideways in Wednesday's session, even as the watch and jewellery maker said 83 per cent of its stores had been opened as of June 30.

    Analysts said the recovery so far has been in line with expectations, but the outlook for the rest of the year remains uncertain.

    Morgan Stanley maintains its 'underweight' stance on the stock with a price target of Rs 770, as it believes a full-fledged demand recovery will remain elusive in 2020.

    CLSA maintained a ‘sell' rating with a price target of Rs 855, even as it acknowledged the aggressive cost-saving measures that the company has undertaken. This brokerage is factoring in a 62 per cent drop in overall June quarter revenue and 75 per cent drop in Ebitda.

    JPMorgan maintained a 'neutral' stance on the stock with a price target of Rs 1,030, and suggested that sustainability of the recovery would be key to the stock performance.

    Macquarie, meanwhile, maintained an 'outperform' rating with a target of Rs 1,123, as it believes the current crisis provides significant market share gain opportunity to Titan. It said while Titan’s offline sales have been impacted, online channels did well.

    Jhunjhunwala and his better half Rekha Jhunjhunwala together hold 5.53 per cent stake in Titan Company, whose value at Wednesday's intraday price stood at Rs 5,000 crore. The stock on Wednesday traded 0.17 per cent lower at Rs 1,014.

    The Tata Group stock had two calls each in 'buy' and 'sell' categories on the publicly available Reuters Eikon database as of Wednesday. Besides, it had 10 'outperform', five 'underperform' and 10 'hold' ratings, which suggests analysts are fairly divided over the company's prospects.

    On Tuesday, Titan said it started reopening the stores, primarily high street stores, from May 6 onwards in the non-containment areas after a complete loss of sales in April due to the lockdown.

    The company said almost all of its manufacturing operations have commenced operations, but production levels for now are low, given the inventory situation. The Tata Group company said it would ramp up production only gradually when sales pick up to normal levels.

    While the jewellery division has re-opened around 95 per cent of its Tanishq stores till date, operation of stores has been disrupted as and when local governments enforce lockdowns, Titan said.

    Among different segments, revenues for watches and wearables divisions in May and June months stood at 5 per cent and 20 per cent compared with the corresponding months of previous year. Similarly, eyewear segment revenues for May and June were at 15 per cent and 35 per cent, respectively, of last year's numbers.

    Jewellery division revenues, on the other hand, were slightly below 20 per cent in May and around 70 per cent in June. The division also sold gold worth Rs 610 crore in the bullion market at market rates to optimise inventory levels.

    Analysts said that 57 per cent of Titan stores are in Tier 1 cities. About 35 per cent of its stores are in the most affected states of Maharashtra, Delhi, Tamil Nadu and Gujarat. These four places account for more than two-third of India’s Covid 19 cases.

    "Although recovery in the jewellery division is encouraging, we are cautious on the near-term demand outlook in light of the ongoing Covid-19 crisis. Furthermore, the likely lower share of high-value studded jewellery would weigh on profitability in FY21. Moreover, the management’s reluctance to reduce staff cost, while good for long-term growth, would have an adverse impact on near-term profitability," said Motilal Oswal Securities.
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    7 Comments on this Story

    flemingo2008 David30 days ago
    He is a real player.....700times....oooooooh
    Iyer35 days ago
    Lot of people are going to end up with eye sight problems as carona continues ..longer it is more severe it will be. Titan will have to upgrade this segment ..
    People are forced to spend more time indoor in net., Mobile tv..all of them deadly for eyes....
    Binu Pillai35 days ago
    Biggest success of Junjunwala is in the identification of Good Quality companies at cheap prices, invest in them and hold for long term... It need experience... Here is one such Gem of a company "PRECISION CAMSHAFT" a company making Automobile precision components and Electric Vehicle parts.. Make your own analysis and invest for long term. Right now the share is very cheap.
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