HDFC Securities has retained 'Sell' on Titan Company with target price of Rs 221 as against current market price (CMP) of Rs 253 in its report.
Commenting on the investment rationale, the stock broker said, ''We recently met S Subramanian, CFO of Titan Company. Post our interaction, we believe that supply side concerns have been adequately addressed by the company in terms of gold availability and mitigating gold inventory price risks.
However, demand concerns persist on gold and watches consumption due to a mix of slowdown in discretionary spends and persistently high gold prices. Although 4QFY14 has seen improvement in studded jewellery consumption, it has been at the cost of discounts offered to boost revenues.
Titan will continue to remain a net debt company in the medium-term and is exposed to possible reduction in domestic gold premiums. Further, demand for gold and watches continues to be weak and any recovery is still 6-9 months away. Titan's business model continues to be complex with uncertainty prevailing over gold prices, volumes coming at the cost of margins and increased competitive intensity in the jewellery segment.
We revise our FY14-16E estimates upwards by 2, 3 and 2% to factor in hedging benefits but adjust for lower margins on account of discounts offered on jewellery and watches. We retain our Sell rating on the stock with a revised target price of Rs 221/sh (earlier Rs 195) at 20x FY16 EPS of Rs 11.1 (18x earlier) owing to easing of supply concerns and gains from international gold and currency hedging.''
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