Titan Industries - RBI gold import norms to hit hard - AXIS Capital

Titan industries organized an investor call to discuss the impact of new gold import provisions. Management clarified that gold import for domestic use has to be made with 100% cash margin and supplier credit is prohibited. Consequently, jewellery retailers cannot source gold on lease and have to purchase gold outright at prevailing prices.

Titan will resort to debt to fund the higher working capital. To factor in lower interest income and higher finance cost, we revise downwards our FY14E/FY15E EPS by 3%/6% to Rs 9/11. We also lower our target PE to 20x (20% discount to 1-yr fwd median PE of 25x) given (a) RoE compression to 35% (42% in FY13) and (b) potential scaling down of expansion plans as capital requirements increase.

Maintain SELL with revised TP of Rs 210 (20x FY15E EPS) vs. Rs 243 earlier.

Source : Equity Bulls

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