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Titan In A Strong Bull Trend.A Good Buy On Dips!!

Titan in a strong Bull trend.A good buy on dips!!

Titan

Titan, a company that was established back in 1984 is India’s largest watch manufacturer.  Over a span of 3 decades, the company has also managed to make its mark in various other organized and unorganized sectors – Jewellery, Eye wear, Fragrances, etc. The jewellery vertical contributed 83% to Titan’s standalone revenues of Rs 19,250 crores in 2018-19, with watches accounting for 13% and eyewear 3% of revenue.

 

In Q1FY20, Titan’s revenue increased by 16% yoy/ 5% qoq while PAT increased by 11% yoy/4%qoq. Operating profit grew by 19% yoy while margins remained flat at 11% on a yoy basis.  Weak consumer sentiments coupled with price volatility and an increase in customs duty for gold impacted the jewellery business. Despite all that, their jewellery business grew by 14% yoy  but EBIT margins were down by 10bps. Watches biz grew 20% partly aided by a large institutional order from TCS (excluding TCS order, it grew by 12% yoy).  Eye wear biz too reported a growth of 13% yoy while other businesses comprising accessories, fragrances and sarees rose 37.9% YoY.

 

Titan’s Jewellery business has been consistently gaining market share by expanding its presence in geographies with low-market share and enhancing customer value proposition through Gold harvest scheme and Gold exchange programs. . Company had targeted to open 70 stores for the year. It opened 12stores in 1QFY20, and is targeting to open 15 stores in 2QFY20.

 

Going forward, Sales in Q2 are expected to be muted on the back of muted demand for jewellery.

With the reigns of the company being handed over to C.K. Venkataraman (earlier CEO of Titan’s jewellery business) by the end of this month, the company is expected to do better in the 2HFY20- with demand likely to recover once the gold prices stabilize and the wedding season starts. The management expects festive demand and green shoots to drive revenue growth from H2FY20 onwards and has guided 20% growth in revenue from their jewellery business in the 2HFY20.

 

The stock is an absolute darling especially amongst Nifty stock pickers.  Over the past decade, their topline has quadrupled and they have managed to maintain a healthy balance sheet. The company has a strong financial risk profile with substantial liquid investments and cash reserves. Their RoE and Roce is at 25.22% and 26.42% respectively.

 

 

Technical View

Titan is in a strong bull trend, in the last three years  the stock has multiplied more than three times.  This stock has been giving small corrections falling a mere 38.2% from a higher swing indicating the stock is in a strong bull trend. The current fall in the counter is again a mere 38.2%  from the pivot at 529.75. Technically  a stock that corrects  only 38.2% of a swing is in a very strong up  trend. The fall from the highs halted at the Fibonacci confluence zone of 991-1000.40 levels. At the confluence zone  we can find a Doji. Doji is a single candlestick reversal pattern. RSI on both the monthly and  weekly charts is  oscillating between 40-80 which is the bull zone of the RSI. At the  confluence zone RSI was a tad above the 40 levels  confirming the strength in the counter. Therefore price momentum and candlestick all collectively are indicating that the fall in the counter is over. The stock consolidated for four weeks around the lows and has broken out from the congestion zone last week. On the daily charts the counter has resistance at 1175 which has halted the current run in the counter.  Hence dips to 1130 levels will be a good buy. Above 1175 levels major resistance lies at 1266 and then 1462. Therefore the dips in the counter are a good opportunity to buy as this stock is in a tremendous bull run.

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