Multibagger Tata stock can zoom 21% to fresh all-time high in 2023: CLSA

NEW DELHI: Following a strong double-digit growth across all its segments in the December quarter, shares of Tata Group company Titan can rally to a fresh record high figure of Rs 3,000 in the next 12 months, according to global brokerage firm CLSA.

The stock, which is also the top bet of the billionaire Jhunjhunwala family, lost up to 2.6% to the day's low at Rs 2,470.70 on BSE on Monday. CLSA's target signals an upside potential of over 21% from the current market price.

"With the scale-up of adjacent businesses and a sustainable business model, we believe it is best to value Titan using a SoTP methodology. We ascribe 55x PE to the jewellery business, value watches at 20x EV/Ebitda, value eyewear at 10x EV/Sales, and ascribe 5x EV/Sales for other initiatives (eg Taneira and fragrance are scalable opportunities for Titan)," CLSA said while giving an outperform rating to the Nifty stock.

In a business update, ahead of the full quarterly results which would be announced later in the quarter, Titan said healthy consumer demand spurred by a vibrant festive season resulted in a 12% growth in combined sales year-on-year (YoY) across the company's standalone businesses.

The mainstay jewellery business grew 11% YoY amid healthy new buyer growths in the festive period, higher-value purchases in the studded category and unique new collections for the season.

"Unlike staple companies, which signalled rural demand remaining subdued, Titan, which caters largely to urban customers, spoke about healthy consumer demand aided by a good festive season," CLSA said.

The stock, which hit a fresh all-time high of Rs 2,790 on 31 October last year, has since then corrected around 11%. A favourite of many long-term investors like the Jhunjhunwala family and PMS fund manager Saurabh Mukherjea, Titan has underperformed in the last one-year period. On a five-year scale, the stock is a multibagger with 175% return.

In the meantime, domestic brokerage firm Motilal Oswal, too, maintained its structural investment case for the stock with a target price of Rs 3,080.

"It has compounded earnings by ~20% for an extended period of time. In the jewelry industry, which is organizing at a rapid space, it is clearly at the vanguard in terms of growth among organized players. Its runway for growth is long, with a market share of ~6%. Unlike other high-growth categories, the competitive intensity from organized and unorganized peers in jewellery is considerably weaker," Motilal said.

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