JM Financial upgrades Titan after Damas Buy: 3 reasons powering the bullish call
A big upgrade for Titan this morning. JM Financial has upgraded the stock to ‘Buy’ from ‘Hold’ after it entered into an agreement to acquire a 67% stake in Damas, which will provide the former access to the Damas Jewellery business. JM Financial has, however, kept the target price the same at Rs 3,725 per share, implying over 8% upside.
Titan: Why is the Damas acquisition a big positive?
Titan’s Damas acquisition has multiple positives as per JM Financial. The brokerage lists out that this acquisition –
-Helps Titan to become the 3rd/4th largest player in the 4th largest jewellery market in the world
-Gives it access to 146 premium locations in UAE,
-Offers scope of improvement in profitability in the GCC region led by several synergy benefits in terms of talent, retail networks, and supply chain.
JM Financial on Titan: Strategic acquisition
According to JM Financial, the “acquisition is strategically significant for Titan’s jewellery business as it will facilitate expansion across the 6 GCC countries.” CK Venkataraman, MD of Titan, highlighted that the Damas acquisition will help Tanishq step out from its diaspora focus to other nationalities and ethnicities.
“The acquisition will not only create a significant new global opportunity for Titan but will also enhance Titan’s overall position in the jewellery market in the GCC countries, considering it provides access to 146 premium locations in the UAE market.” JM Financial added.
They also expect this to bring in multiple synergy benefits in talent, retail networks and supply chains, and employee costs for Titan.
Damas acquisition details
Titan has agreed to acquire a 67% stake in Damas LLC through its wholly owned subsidiary Titan holdings International FZCO. Damas LLC is the holding company for the Damas Jewellery business in GCC countries – from Mannai Corporation (ex-Graff Monobrand franchise business). The current Graff Monobrand franchisee business of Damas LLC will be discontinued before completion of the acquisition.
Titan has agreed to acquire Damas at an enterprise value of 1,038 million AED (Arabic Emirates Dirham). This is approximately Rs 2,330 crore (as per July 22 exchange rates) through cash consideration. Titan will also have the right to acquire the remaining 33% stake from Mannai after December 31, 2029, subject to certain conditions. The deal is likely to be financed through a combination of debt and cash balances, and internal accruals.
Damas: Know the brand
Damas Jewellery is a Dubai-based enterprise founded in 1907. It is considered one of the premier jewellery retailers across West Asia. The company has 146 stores across the 6 GCC countries in the region. The brand blends Arabic architecture and the Arabic alphabet along with contemporary trends to cater to a diverse clientele. Revenue for the company has grown at 13% CAGR over CY22-24.
Titan share performance
The Titan share price has been in focus lately. The shares saw a sharp fall on July 8 after the company’s Q1 business update. This is because the investors were worried about the company being able to sustain its same-store sales. Overall, the shares of this Tata Group stock have risen 4% in 6 months and delivered 7% gains in 1 year.