Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D u t y h i k e t o b e p a s s e d o n …
The government has revised the import duty levied on gold and changed
it from a flat | 300/10 gm to 2% of the value. While this move will mean
increased revenues for the government, the customer will also have to
shell out more money for the gold purchased. From the company’s
perspective, we do not see any significant impact on the operating
margin or the profitability front as the incremental cost will be passed on
to customers. Titan may witness some pressure on volumes on the back
of increased prices. However, we do not believe the impact will be
significant. While we have conducted a sensitivity analysis to gauge the
impact of the revised duty, we have not revised our estimates as we await
further clarity on the same. We will review the numbers after a detailed
interaction with the management post the Q3FY12 results.
Change in import duty regime of precious metals
The import duty on gold has been changed to 2% of the value of gold
imported from the earlier flat rate of | 300/10 gm. Similarly, for silver the
customs duty has been increased from a flat charge of | 1500/kg to 6% of
the value of imports.
Negligible impact on profitability
We do not expect any significant impact on the back of the changed duty
structure. The company’s volumes may be marginally impacted
(negatively) as consumers may hold back buying decisions due to higher
prices. We have conducted a sensitivity analysis (refer exhibit 2) to gauge
the impact on earnings if volumes dip on account of the price hike arising
due to passing on of the import duty. Based on the various scenarios
assumed, our earnings estimates could get negatively impacted in the
range of 1.5 – 7.3%, if volumes dip.
V a l u a t i o n
Titan has historically traded at a one year forward P/E multiple of 25.0x
and is currently trading at 23.5x FY13E EPS. We believe the current price
discounts the concerns with regard to lower growth as compared to FY11
and also weaker consumer sentiment. We maintain our BUY rating on the
stock with a target price of | 235 (30x FY13E EPS)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D u t y h i k e t o b e p a s s e d o n …
The government has revised the import duty levied on gold and changed
it from a flat | 300/10 gm to 2% of the value. While this move will mean
increased revenues for the government, the customer will also have to
shell out more money for the gold purchased. From the company’s
perspective, we do not see any significant impact on the operating
margin or the profitability front as the incremental cost will be passed on
to customers. Titan may witness some pressure on volumes on the back
of increased prices. However, we do not believe the impact will be
significant. While we have conducted a sensitivity analysis to gauge the
impact of the revised duty, we have not revised our estimates as we await
further clarity on the same. We will review the numbers after a detailed
interaction with the management post the Q3FY12 results.
Change in import duty regime of precious metals
The import duty on gold has been changed to 2% of the value of gold
imported from the earlier flat rate of | 300/10 gm. Similarly, for silver the
customs duty has been increased from a flat charge of | 1500/kg to 6% of
the value of imports.
Negligible impact on profitability
We do not expect any significant impact on the back of the changed duty
structure. The company’s volumes may be marginally impacted
(negatively) as consumers may hold back buying decisions due to higher
prices. We have conducted a sensitivity analysis (refer exhibit 2) to gauge
the impact on earnings if volumes dip on account of the price hike arising
due to passing on of the import duty. Based on the various scenarios
assumed, our earnings estimates could get negatively impacted in the
range of 1.5 – 7.3%, if volumes dip.
V a l u a t i o n
Titan has historically traded at a one year forward P/E multiple of 25.0x
and is currently trading at 23.5x FY13E EPS. We believe the current price
discounts the concerns with regard to lower growth as compared to FY11
and also weaker consumer sentiment. We maintain our BUY rating on the
stock with a target price of | 235 (30x FY13E EPS)
No comments:
Post a Comment