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Why Morgan Stanley upgraded this stock just 2 months after downgrading

Why Morgan Stanley upgraded this stock just 2 months after downgrading

Why Morgan Stanley upgraded this stock just 2 months after downgrading
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By Pranati Deva  Sept 17, 2019 12:56:28 PM IST (Published)

Just two and a half months after global brokerage firm Morgan Stanley downgraded Titan to 'equal-weight' from 'overweight', it has upgraded it back to 'overweight' and raised its target price to Rs 1,300 per share from Rs 1,110 earlier.

Just two and a half months after global brokerage firm Morgan Stanley downgraded Titan to 'equal-weight' from 'overweight', it has upgraded it back to 'overweight' and raised its target price to Rs 1,300 per share from Rs 1,110 earlier.

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The brokerage believes that strong growth in a difficult macro environment should be rewarded by re-rating. The research firm has raised FY20, FY21 and FY22 earning per share estimates by 3 percent, 2 percent, and 1 percent respectively. It also said that Titan's ongoing marketing and promotion spends are unprecedented.
The stock has risen 25 percent in 2019 and around 40 percent in the last one year.
According to Morgan Stanley, the downgrade was not on the basis of earnings. However, It saw less room for any more positive surprises from the company in the upcoming quarters.
"Titan remains one of our favourite long-term plays on urban discretionary consumption growth in India. However, following the strong trailing performance, we are now reluctant to push multiples beyond current levels. We see balanced risk-reward at the current stock price," the brokerage explained.
Meanwhile, Credit Suisse has also downgraded the stock to 'neutral' from 'outperform' with target unchanged at Rs 1,250 per share.
For Q1, Titan reported a lower-than-expected 6.17 percent year-on-year (YoY) growth in standalone profit at Rs 370.73 crore. Its total income rose 14.72 percent to Rs 4,995.64 crore over Rs 4,354.52 crore in the same period last year.
Titan's jewellery division recorded a growth of 13.3 percent in Q1 to Rs 4,047 crore from Rs 3,572 crore it reported last year. Growth in the jewellery segment was adversely impacted by high gold prices, especially during June 2019, the company said.
Commenting on Q1 earnings, Bhaskar Bhat, managing director of Titan said: "The macro-economic environment coupled with lower consumption has impacted some of our businesses. The retail growth in jewellery was driven by encouraging performance in the studded as well as wedding jewellery segments. However, there has been a weak consumer sentiment prevailing across, especially in jewellery with additional factors like price volatility and customs duty increase."
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