Titan Industries - Back to normal on gold procurement financing; upgrade to ADD - Kotak

RBI's approval to hedge gold in international exchanges and USD/INR in the domestic market should aid Titan replicate the earlier gold-on-lease model (in substance, if not in form). Even as the new arrangement lacks the predictability of gold-on-lease scheme (on account of basis risk on forwards), forward premia (on gold and especially INR/USD) should take the net cost of financing gold inventory back to the gold-on-lease days. We raise our EPS estimates for FY2015/16E by around 7% each despite going more conservative on demand forecasts. Raise target price to Rs. 275; upgrade to ADD (from REDUCE).

Source : Equity Bulls

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