Shares of Titan Company Ltd. have fallen as much as 8% over the past five sessions as markets fret over gold customs duty hike on the jewellery giant. Morgan Stanley, though, isn't selling.
In its latest note, Morgan Stanley has maintained its 'overweight' rating on Titan with a target price of Rs 5,212, implying an upside of nearly 30% from current levels. The brokerage believes the selloff is creating an entry opportunity.
Morgan Stanley argues that over 50% of the gold the company uses comes directly from customer purchases. This is essentially old jewellery being exchanged at the counter, thus making it insulated from the cost impact that a customs duty hike would impose on a convention importer.
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The remainder is sourced through a mix of metal gold loans and market purchases, thus giving Titan some flexibility in managing input costs.
The brokerage believes any demand softness, if it happens, will be short-lived. While consumers may pause on discretionary jewellery purchases as prices adjust, the structural appetite for gold in India has historically proven to be resilient to duty-driven price shocks.
Morgan Stanley, therefore, states that the ongoing developments in the Titan stock could be an opportunity to add. Shares of Titan are currently trading at Rs 4,021, accounting for a fall of around 0.8% from the last closing price.
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