Rakesh Jhunjhunwala continues to sell Titan shares: Is it worth buying this jewelry maker stock?

Despite Titan being the best performer in Rakesh Jhunjhunwala’s portfolio, the ace investor continues to remove his money from the jewelry maker. Latest shareholding pattern of Titan reveals that the Dalal Street king has reduced his stake by 0.04% between January and March 2019. This would be second consecutive quarter, where Jhunjhunwala has removed a little sum from Titan. In Q3FY19, Jhunjhunwala had reduced his holding by the same amount. Both Rakesh and his wife Rekha Jhunjhunwala have invested in Titan shares since 2015. But Rakesh has kept his wife’s holding intact in Titan, while deducting his own stake in the company in past two quarters. Now, together the Jhunjhunwalas have about 7.05% stake in Titan with 62,451,220 equity shares. Considering Jhunjhunwala has been taken as an ultimate idol for many investors, thereby, the continues selling in Titan does bring the question on whether one should buy its shares. 

The Warren Buffett of India has removed money in Titan, despite the company giving him nearly 24% return so far in 2019. Titan has also touched an all-time high of Rs 1,146.30 last week.

According to TrendLyne.com data, Jhunjhunwala’s holding in Titan is now valued over Rs 7,005 crore. By end of December 2018, the data had revealed that Jhunjhunwala’s wealth in Titan was not even near Rs 6,000 crore. Hence, in less than four months of 2019, Titan has made Jhunjhunwala richer. One can believe that, Jhunjhunwala is just booking profit in Titan, to diversify his portfolio. 

But the real question for investors, whether they should buy Titan shares. Let’s find out! 

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Bharat Chhoda and Cheragh Sidhwa, Research Analysts at ICICI Securities said, “In its quarterly preview of Q4FY19, the management highlighted that the jewellery division continued to gain market share despite headwinds impacting the jewellery industry. The division added a record number of Tanishq stores (35) with revenue growth of 22% for FY19. The watches division sustained its healthy performance on the back of new product launches, especially in the smartwatch category, resulting in robust revenue growth of 16% in FY19. The management remains optimistic on the growth outlook with the aim of achieving 20% topline growth in FY20E.”

Thereby, the duo added, “Titan has consistently displayed its ability to gain market share amid a tough industry scenario. Robust balance sheet (30%+ RoCE and virtually debt free status) and asset light distribution model (A/TO: ~10x) has enabled it to outpace peers in terms of store addition. Enriched jewellery portfolio with launch of new collections (wedding space) and sustained investment in brand building is enabling better than industry revenue growth. We model revenue, earnings CAGR of 21%, 27% respectively, in FY18-21E. We reiterate our BUY rating on the stock with a revised target price of Rs 1290 (49.0x FY21E EPS).”

On Tuesday, Titan shares finished at Rs 1,122.20 per piece up by Rs 31.95 or 2.93% on Sensex. If we take into consideration current market level, then Titan is expected to rise by nearly 15% further. Hence, one can still continue to buy the jewelry maker’s share price. Even though Jhunjhunwala has sold some shares in Titan, he still continues as an investor to be the biggest gainer from Titan’s expected target price.