Titan shares a golden compounder? Why Morgan Stanley thinks Tata Group stock could rally to Rs 5,182

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,” while stating that recent concerns around potential regulatory restrictions have overshadowed the company’s strong operating performance.

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. Just when investors thought the worst may already have been priced in, the Centre also raised import duties on gold and silver to 15%, triggering fresh panic across jewellery stocks. Titan shares, as a result, are down 8% in the last 1 month.

Morgan Stanley revised its target price on the stock to Rs 5,182 (27% upside) from Rs 5,212 earlier after cutting its FY27-FY29 earnings estimates by 4-5%. The brokerage said it has lowered its FY27 revenue growth estimates for Tanishq, Mia and Zoya to 18% from 20% earlier to factor in the impact of the recently announced customs duty hike.

The brokerage said Titan remains well positioned to navigate any near-term challenges, with earnings visibility continuing to remain intact. According to Morgan Stanley, the current valuation offers an attractive entry opportunity for investors.

It noted that 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. Morgan Stanley said Titan’s core business fundamentals remain strong, making it a consistent and predictable business to own over the long term.

The brokerage added that even in a scenario involving restrictions on gold supply availability, it expects the stock could decline to around Rs 3,500, implying nearly 15% downside from current levels. However, it said this would still remain above its bear-case assumptions, as such restrictions are unlikely to materially impact the company’s long-term growth trajectory.

Japanese brokerage Nomura agrees. The impact on Titan appears relatively manageable across categories, it said in a note earlier in May. The brokerage believes 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.

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.

The brokerage expects almost no impact on diamond jewellery, which contributes around 25-30% of sales, given lower direct dependence on gold prices and Titan’s relatively affluent customer base.

Nomura also believes Titan could strategically utilise part of the one-time inventory gains arising from higher duties to drive customer acquisition, support demand and expand market share through promotional activity.

Indian gold buying, particularly during weddings and festivals, has historically remained deeply emotional and culturally entrenched. Ponmudi added that organised jewellery players may continue gaining market share as consumers increasingly gravitate toward trusted and transparent brands during uncertain periods.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)