The Titan share price is in focus after the launch of the ‘beYon’ store— the latest venture from the House of Titan, as the jewellery major forays into lab-grown diamonds. The stock has already delivered 22% gains so far this year, is there room for further upside? Key brokerage house, Nuvama has retained its ‘Buy’ on the stock, as they see it as a positive. The target price continues to remain unchanged at Rs 4,672. This implies about 17% upside from current levels.
The key aspects of Titan’s beYon launch include-
-Collection of lab grown diamonds set in typically 14K and 18K gold.
-Focus on daily and casual wear with cuts being the main differentiator
-No buyback policy
-Making charges ranging from Rs 1,800–2,000 per gram
Moreover, Titan is providing a proprietary in-house certificate documenting diamond specifications with every purchase.
Nuvama bullish on Titan: Key growth drivers
Nuvama maintains its bullish call on the back of this key retail foray. According to them, the “Indian retail landscape is evolving with inter-play of several demographic and economic factors.”
They believe that the long-term prospects backed by “changing consumer behaviour in favour of larger discretionary spending has set the stage for healthy growth in the retail space over the next five years.”
They see “big opportunity lies in the growing share of organised retail with growing trend among consumers to allocate a larger share of income to consumption and gradual improvement in lifestyle.”
According to Nuvama, Titan can “create significant value” with its large distribution presence, “strong brand, designing skills and proven execution track record.” They believe that the company has proved its mettle by emerging successful against various regulatory hurdles that have emerged over the past one year. With a “robust balance sheet, strong brand equity and professional management team in place, we remain bullish on Titan,” they added.
Nuvama on Titan: Focussed on consumer trends
Titan plans to open few more stores across Delhi and Mumbai. The initial stores are going to serve as pilot locations, allowing the company to study consumer buying behaviour and the market’s acceptance of lab-grown diamonds.
Along with the store, the company also launched the website as well as social handles. The website, however, is only for showcasing products for now and does not yet support online buying. beYon is developed focusing towards the young audience, and the format does not offer any products related to wedding jewellery. It is primarily catering to the daily/casual wear jewellery segment.
Though Nuvama views the move as a positive, but it has not incorporated the format into its financial estimates, as they believe it is too early for a numerical assessment.
Nuvama on Titan: Key risks to watch out for
Nuvama, however, listed out key risk factors to watch out for –
-Customs duty: The current customs duty is at 10%. However, there are expectations, as per Numvama, that this will be reduced in the near-term, “given the rampant smuggling.” But any further hike in customer duty can be a negative.
-Macro conditions: Nuvama pointed out that the poor macro outlook could also lead to prolonged slowdown in the company’s growth as its revenue depends on discretionary spending.
-Volatility in gold prices: The Nuvama report added that gold prices have a significant bearing on gold demand. “Any steep rise in prices results in lower demand and investment buying that comes in is low margin,” the brokerage added
Additionally, potential margin pressure due to deterioration in product mix and investment buying is another area of concern for Titan’s jewellery business. They believe that any drop in watches and jewellery division sales on account of fall in discretionary spending and higher growth in tier II and IV towns could impact margin. The seasonality of the business and regulatory hurdles are other factors to watch.