Sharing his perspective on Titan’s third-quarter update, Mehta said the stock has been a rewarding long-term investment.
“First of all, the disclosure that we had invested in Titan—it has been a great story for us and has delivered multibagger returns. Such numbers coming in, it is the second quarter in a row that such great numbers have come through, so we are quite pleased,” he said.
Mehta acknowledged that the stock trades at a steep valuation of nearly 88 times earnings but believes Titan has entered a new growth phase.
“Although the stock is trading expensive at 88 times, it seems to have entered a new growth phase. In the past, apart from the last two or three quarters, the growth rates used to be in the middling teens, but this kind of growth rate is phenomenal,” he noted.
A key tailwind, according to Mehta, has been the sharp rise in gold prices, which has mechanically lifted Titan’s revenues.“A lot of it has to do with gold prices because, at the end of the day, their inventory and their sales are all marked to gold, and gold has rallied significantly in the last few months,” he explained.However, he cautioned that not all topline growth translates into profitability.
“One point perhaps that you may have missed is that gold coin sales have doubled. That does not add much to profitability, although it increases the topline,” Mehta said.
Despite softer demand, Titan has managed to protect margins through higher making charges, aided by the linkage to gold and studded gem prices. Still, Mehta believes the stock is fairly valued at current levels.
“Broadly, I would say at these levels it is more or less fully priced. As an investor, we remain invested, hoping that the stock’s PE multiple remains constant and long-term growth rates could easily be in the mid-teens,” he added, calling Titan a “great play on India’s rising wealth and consumption,” albeit expensive.
FMCG: A Sector to AvoidTurning cautious on the FMCG space, Mehta ruled out Godrej Consumer Products as a preferred pick.
“If you look at the 10-year EPS growth, it has been 7.5%, and that is true for a lot of FMCG stocks. We have been negative on FMCG for several quarters, if not years,” he said.
According to him, many FMCG categories have reached maturity, with volume growth barely tracking population growth.
“All those great numbers coming through from the FMCG industry are exit opportunities from FMCG stocks per se. This is one sector where secular stagnancy is coming through,” Mehta remarked.
On GCPL specifically, he highlighted persistent international challenges and stretched valuations.
“Valuations are rich at around 60 times or so. For me, every rise in FMCG is a sell,” he said, adding that newer consumption themes like liquor and beverage companies—such as Varun Beverages—offer far better growth prospects.
Lab-Grown Diamonds: Not a Near-Term Game ChangerAddressing concerns around Titan’s foray into lab-grown diamonds, Mehta struck a balanced note.
“Lab-grown diamonds will become mainstream and eventually form a larger portion of the jewellery industry, but that is a few years away,” he said.
He stressed that gold jewellery continues to be the primary growth driver, supported by rising gold prices and the ongoing shift from unorganised to organised players.
“I would not look at Titan more positively just because they have launched lab-grown diamonds. It is a good natural extension, but I do not see it driving growth over the next two to three years,” he added.
QSR Space Faces Structural HeadwindsMehta also expressed caution on Jubilant FoodWorks and the broader QSR segment, noting signs of maturity and slowing same-store sales growth.
“Even QSR is going the FMCG way. Same-store sales growth has been pretty tepid, and penetration is now quite deep,” he said.
He believes food aggregators have fundamentally altered consumer behaviour.
“The advent of food aggregators has dented long-term demand for the QSR industry. There is more choice and convenience in ordering in rather than going out,” Mehta observed.
In his view, investors may be better placed looking at platform plays.
“Within consumption and QSR, you are better off with Zomato or Swiggy. The real growth is coming there,” he said.
Devyani–Sapphire Merger: Efficiency Over GrowthOn the Devyani International–Sapphire Foods merger, Mehta downplayed competitive threats to Jubilant, describing the move as an efficiency-driven consolidation.
“Whenever an industry reaches maturity and growth rates slow down, players start thinking about extracting efficiencies, and that is when mergers take place,” he explained.
He also flagged risks linked to overseas expansion.
“When companies go into markets like Turkey, Malaysia, Thailand or Africa, there are too many moving parts. The fundamental business remains slow-growing,” Mehta warned.
Summing up, Mehta cautioned that low single-digit same-store sales growth is unlikely to create meaningful long-term value.
“Four to five percent same-store sales growth is not going to generate great value for minority shareholders,” he concluded.
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