Why Titan Stands Out In A Struggling Consumer Market

Titan Co. remains Macquarie’s top pick in the consumer and lifestyle segment as it faces minimal headwinds despite the current challenges in the sector. The broader space continues to grapple with issues seen over the past few months, including a slowdown in urban spending and a gradual rural recovery. Participants are awaiting a more steady rebound as inflation eases.

The sector is also under pressure from the expansion of quick-commerce players into multiple categories, posing challenges to retail and e-commerce giants like DMart and Nykaa, Macquarie noted. However, the Tata venture stands apart, unaffected by these concerns, solidifying its position as the brokerage’s top pick. 

ITC Ltd. follows as a key choice, though it awaits a GST decision that could impact its cigarette business. Marico Ltd. comes next on its list, with Nuvama also noting that the urban slowdown has had limited impact on the company. Its food and digital business, reportedly growing at over 20%, continues to cater to mid- and upper-class consumers.

Meanwhile, Asian Paints Ltd. and Birla Opus are locked in competition, with the latter making significant strides in the segment through healthy expansion efforts.

Titan has an 'outperform' rating with a target price of Rs 4,000. Both ITC and Marico also have an 'outperform' rating with target prices of Rs 560 and Rs 750, respectively.

Over the past week, Macquarie engaged with policymakers, industry players, and experts to assess consumer demand trends. 

Consumer Slowdown: Consumer companies report continued urban weakness, with rural recovery moving at a slow pace. Volume trends are expected to remain stable, or slightly weaker in the December quarter compared to the second quarter.

Titan’s Competitive Advantage: Unlike Asian Paints, which faces pressure from Aditya Birla’s aggressive entry into decorative coatings, Titan is insulated from similar competitive threats. Aditya Birla Group's focus in jewellery, through its 'Indriya' stores in major cities, targets conversion from unorganised players rather than competing with established brands like Titan.

Policy Outlook: Policymakers are exploring measures to support urban consumers and considering deregulation across sectors to accelerate job creation.

Quick Commerce Growth: Quick commerce players are expanding into categories like electronics and beauty to capture a larger share of consumer wallets. Innovations in inventory management are expected to overcome potential constraints from limited dark store sizes.

Titan shares fell as much as 1.76% during the day to Rs 3,412 apiece on the NSE. It has fallen 3.49% in the last 12 months and 6.3% on a year-to-date basis. The relative strength index was at 60.36.

Seventeen of the 34 analysts tracking the fashion accessories company have a 'buy' rating on the stock, 12 recommend a 'hold' and five suggest a 'sell', according to Bloomberg data. The 12-month analysts' consensus target price on the stock is Rs 3,659.28, implying an upside of 6.3%.