Wall Street major Morgan Stanley has named Titan Company, the country's largest jewellery retailer, its new top pick, describing the stock as 'The Golden Compounder'. According to reports from The Economic Times, the brokerage stated that recent concerns around potential regulatory restrictions have overshadowed the company's strong operating performance. The firm revised its target price to ₹5,182 (27% upside) from ₹5,212 earlier after cutting its FY27-FY29 earnings estimates by 4-5%.
Earlier this month, Prime Minister Narendra Modi publicly urged Indians to delay jewellery purchases for a year in an effort to help stabilise the rapidly weakening rupee. As reported by The Economic Times, the Centre also raised import duties on gold and silver to 15%, triggering fresh panic across jewellery stocks. Titan shares are down 8% in the last 1 month as a result of these developments.
According to Morgan Stanley, the stock is currently trading at 54 times 12-month forward price-to-earnings, below its five-year and three-year average multiples of 67 times and 65 times, respectively. The brokerage noted that the current valuation offers an attractive entry opportunity for investors. Titan's core business fundamentals remain strong, making it a consistent and predictable business to own over the long term.
As reported by Nomura in a note earlier in May, the impact on Titan appears relatively manageable across categories. The coins segment, which currently contributes around 10-15% of sales compared with mid-single-digit contribution earlier before the sharp rise in gold prices, could witness the biggest moderation in demand. However, since the segment operates at low single-digit margins versus average jewellery making charges of around 20%, lower contribution from coins could actually support margins.
According to Nomura, daily-wear jewellery, which contributes roughly 40-50% of sales, could see some pressure because of higher price sensitivity and the discretionary nature of purchases. However, Titan's growing focus on lightweight jewellery and lower ticket-size products may cushion the impact. Wedding jewellery, which contributes around 15-20% of sales, is expected to see minimal impact because of its essential and culturally non-discretionary nature. Nomura believes increasing adoption of old gold exchange schemes could further support affordability despite higher ticket sizes.
