Jewelry recovery and festive season may push this Gold stock by 10 percent

Source :Sify
Author :Finance Desk
Last Updated: Wed, Aug 12th, 2020, 13:22:05hrs
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Titan Raga

Volatile corrections in Gold rates may have ebbed investors' enthusiasm in the Gold bull-run story.

While analysts and industry leaders project Gold rates to touch levels of Rs 65,000 in a year, volatile corrections have prompted investors to reassess their bullion investments. Gold has slipped for the third day on trot to levels below $1,900 per ounce.

For investors keen to trade safe, stocks of Titan may offer an element of safety. Stocks of the jewelry and watch company are expected to reach levels of Rs 1,215 in a timeframe of 12 months according to a research from Emkay Global. Analyst Ashit Desai in a report dated Aug'10 suggests that a recovery in the jewelry sector and an improvement in consumer spending is likely to benefit its stocks.

Jeweler recovery may continue to surprise; maintain Buy: "We reduce FY21 estimates but maintain FY22/23 estimates. Faster recovery in jewelry is positive and improves growth visibility. Share gains from weakening competition and the increasing normalcy across stores should drive further improvement in jewelry growth. We maintain Buy/OW in EAP, with a revised TP of Rs1,215, based on 47x Dec'22E EPS," read the note from Desai.

On Wednesday, shares of Titan were down by 1.41 percent, quoting Rs 1,052 per share (at the time of publishing this story). touched to sub-50,000 levels.

Also Read: Titan Q1 loss at Rs 270 crore as Covid-19 lockdown dents sales

"Titan posted a nearly 62% YoY revenue decline in Q1FY21. Ex-Bullion sales, Jewelry/Eyewear/Watches saw a decline of nearly 70%/80%/% YoY in Q1FY21. Recovery has been relatively better in the Jewelry segment (nearly 85% of revenues in FY20), with LTL decline of nearly 18% in June'20. Watches and eyewear delivered a nearly 50% LTL YoY decline in June'20. Titan, however, indicated market share gains from the unorganized and national-level retail chains due to better liquidity, offerings and digital initiatives. While stores have largely opened (nearly 97%) but intermittent lockdowns continue to affect operations. Titan expects the return of overall revenue growth by Q4FY21E. Recovery in July has been strong, with jewelry clocking 101% of July'19 sales, helped by a low base (Sales declined in July'19) and preponement of discount schemes and wedding purchases, as per management."

"TTAN is well placed to gain share from weakening competition. The steep increase in gold prices and cut in discretionary spending may have an adverse impact but higher outlay of wedding spends on jewelry and share gains will be positive for growth in H2," adds the report.

The key point for readers is improvement in the third quarter. Charts from Emkay implies that Jewelry sales may pick steam during the third quarter and hence buying or holding Titan stocks while Gold rates are correcting may sound like a pragmatic approach to staying invested in bullion markets.

Also, a correction in gold rates to sub-50,000 levels may induce fence-sitters to consider buying jewelry. Here are charts from the report:


 

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