Titan Company
Sharekhan has said in a note that “Titan Company Limited’s (Titan) pre-quarter update outlined a good start to FY2023 with strong growth of 3.0x in revenue and robust growth across key businesses and subsidiaries. We expect revenue to be at Rs. 9,180 crore at a consolidated level (and ~Rs. 8,650 crore at a standalone level). Revenue of the jewellery business (excluding bullion sales in the base quarter) grew by 3x y-o-y i.e. to ~Rs. 7,570 crore. Despite near-term headwinds of high inflation, the company is confident of maintaining good growth momentum in the quarters ahead because of market share gains, network expansion, and shift to trusted brands. The company aims to achieve consistent double-digit revenue growth over the next five years by strengthening core businesses such as watches, jewellery, and eyecare through efficient capital allocation plans. Further, profitability is expected to consistently improve with consistent growth in the jewellery business and scale-up in new ventures."
“Titan is aiming to generate revenue CAGR of over 20% revenue during FY2022-FY2027 on back of its ambitious growth plan in the medium term. This along with consistent margin improvement will help cash flows to improve strongly in the coming years. FY2023 will be a strong year for the company due to low base in core businesses. The stock has corrected by ~15% in the past three months, in-line with substantial correction in the broader indices. The company’s strong growth outlook, industry tailwinds in the medium term, and strong balance sheet make it a best play in the retail space. Hence, we maintain our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 2,900," said the brokerage.
Tata Consultancy Services Ltd (TCS)
The brokerage has said that “TCS reported steady revenue growth with strong client addition across large revenue buckets and healthy deal wins, while margins lagged our expectations owing to wage revisions, supply-side challenges and rising discretionary expenses. Constant currency (CC) revenue grew by 3.5%/15.5% y-o-y in Q1FY2023, in-line with our estimates, led by continued strong growth in North America and broad-based growth across verticals with strong growth in Retail & CPG. Deal TCVs remained healthy at $8.2 billion (including two large deals worth of $400 million+) during Q1FY23, up by 1.2% y-o-y, but it was down 27% q-o-q. The book-to-bill ratio stood at 1.21x, in-line with its long term average book-to-bill ratio. EBIT margin declined by 190 bps q-o-q to 23.1%, lagged our estimates. TCS continues see strong traction across cloud adoption, operating model transformation, vendor consolidation, growth and transformation (G&T) programs. We believe the company is well positioned to gain most from market opportunities even in case deteriorating macro concerns given its strong marquee clientele, strong capabilities and solid execution capability."
“We believe that TCS has a robust business model which would leverage both G&T opportunities and operation transformation program given its strong capabilities and end-to-end service capabilities. We expect the company’s US Dollar revenues and earnings to clock a 10%/11% CAGR over FY2022-24E. At CMP, the stock trades at valuation of 28x/25x its FY2023E/FY2024E earnings, in-line with 5-year average 1-year forward PE multiple. We continue to prefer TCS considering its better supply-management capability, best-in-class execution, deep expertise, full-service model and excellent payout ratios. Further, the stock price correction of around 14% on a YTD basis offers good entry opportunity for long-term investment. Hence, we maintain a Buy on TCS with a revised PT of Rs. 3,650," said Sharekhan.
Mahindra and Mahindra Ltd (M&M)
As per the brokerage “Mahindra and Mahindra Ltd (M&M) and British International Investment (BII) have executed a binding agreement to invest Rs. 1,925 crore ($250 million) each into M&M’s wholly owned subsidiary that will be incorporated soon to spin its passenger electric vehicle (EVCo) business. BII is a UK government development finance institution and a leading impact investor with focus on climate change and ESG. BII is expected to acquire 2.75-4.76% stake in M&M’s subsidiary EVCo at a valuation of US$ 5.1-8.8 billion (Rs. 40,441-70,070 crore). Promoters, along with investors to infuse ~Rs. 10,000 crore in the new EVCo between FY22 to FY27, to launch five electric vehicle models. The company targets its Electric SUV penetration to be 20-30% of its overall SUV portfolio by FY2027 and expects EV volumes at ~200,000 per annum in best case scenario. The EVCo will be asset light and leverage M&M’s ecosystem of suppliers, dealers and financers."
“M&M will provide manufacturing support, design, product development, technology and sourcing services on arm’s length. We firmly believe that M&M is on track with its growth roadmap. Besides its aggressive plans for the farm equipment and ICE passenger car segments, the company is taking leap towards making strong product portfolio for passenger electric vehicles. In the ICE segment, M&M has become No.1 in SUV revenue market share in H2FY22 with 16.8% market share. We expect Scorpio-N to further consolidate its share in the SUV market. Successful new launches will continue to help M&M to increase its market share in the SUV and LCV segments. M&M has guided for strengthening of the SUV segment through product launches of 13 new products by FY2027E, including EV launches. Further, the management continues to focus on the farm equipment segment and maintained its guidance to achieve a 10x revenue growth by FY2027E. M&M has maintained its FY25E guidance to deliver an 18% RoE and 15-20% EPS growth," said Sharekhan.
The brokerage has further claimed that “We expect M&M to benefit from its leadership status in the tractor segment, strengthening position in the LCV segment and regaining its market share in the highly competitive SUV segment. M&M is on track with its growth roadmap. The company plans its farm business to grow 10x by FY2027E, while strengthen its SUV segment by adding 13 new products by FY2027E, including EV launches. The investment commitment of US$ 250 million by impact investor, British International Investment (BII), in M&M’s passenger electric vehicle arm is a positive development and would help M&M in attracting additional sources of private capital into EVCo venture. The EVCo business add Rs. 132 per share to our SOTP based PT. Further, M&M continues to benefit from the turnaround of loss-making subsidiaries, scaling up of digital platforms and strong performance of its listed entities, which would improve the company’s FCF going forward. We expect standalone earnings to post a 22.5% CAGR during FY22-FY24E, driven by a 16.7% revenue CAGR and 190 bps rise in EBITDA margins. We reiterate Buy rating on the stock with a revised PT of Rs. 1,390. The stock trades at a P/E multiple of 17.6x and EV/EBITDA multiple of 11x its FY24E estimates."
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
