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GST good for Titan, structural increase in market share likely

The effect of GST on organized gold jewellery companies may be neutral to positive said analysts as they turned bullish on the prospects for industry leader Titan. Morgan Stanley maintained Titan Company as a top pick while raising its target price on the stock to Rs 530 from Rs 490. It expects an increase in Q4FY17 and said “The combination of ongoing government efforts to reduce cash transactions and long-term impact of the proposed GST present an opportunity for a structural increase in market share for Titan in the jewellery business – we see a plausible scenario under which the revenue pool nearly doubles through F2019”. The recent proposal by the government to cap cash transactions at Rs 2 lakh instead of Rs 3 lakh as originally proposed in the budget may also not be a big dampener for the company, said analysts, as it looks to bring cash transactions down to 25% in the coming months. However some analysts said Titan’s increase in market share from a higher expected preference by buyers for organized businesses may already be priced in. They found valuations at 30 times the company’s 2019 earnings too steep and said one could look at alternatives like PC Jeweller. Emkay Global Financial Services has a buy on the stock with a target price of Rs 467.

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