Titan at new high; Morgan Stanley upgrades on Tanishq blink

Shares of Titan Company touched record high at Rs 369 per share, up 6.5 percent intraday Thursday, riding high on Morgan Stanley’s bullishness. The brokerage has upgraded the stock to overweight with an upgraded target of Rs 420 per share, betting on the strength of the Tanishq brand and its potential to gain market share. The stock had been under pressure post withdrawal of its saving schemes like Golden Harvest. However, in early August the stock had recovered even though its April-June quarter’s profit fell on a yearly basis. Lower jewellery sales ate into profits as it posted a 2.85 percent decline in net profit at Rs 177.27 crore in Q1 FY15. Brokerages are not deterred by the small hiccup and still held a bullish stance on the watch & jewellery company. According to Morgan Stanley, Titan has been a market performer led by easing of quantitative restrictions on the importing of gold. This is even after it is up 50 percent over the last six months. “This brand is perceived to be better than or as good as other stores/ brands on key factors – design, quality, and trust. It also enjoys strong brand loyalty – nearly 75 percent of its customers are likely to make their next purchase from Tanishq,” it says in a report. The brokerage estimates 170 basis points FY 14-FY 16 jewellery EBIT margin expansion, driving a 23 percent F14-F17 earnings CAGR for Titan, partly offset by higher funding costs. However, the concern that is worrying that worries Morgan Stanley is Tanishq gold prices and jewellery making charges as higher than peers, which may limit its margin expansion over the long term. At 12:12 hrs Titan Company was quoting at Rs 365.95, up Rs 19.70, or 5.69 percent on the BSE.