Titan, ITC seen benefitting most from consumption thrust in Budget 2024

The reduction in gold customs should improve Titan’s growth outlook, noted Macquarie.

The Budget had more negative surprises than positive ones for the stock market, but investors in specific stocks have something to cheer about. According to analysts tracking consumer stocks, ITC and Titan are expected to benefit from some of the measures announced in the Budget.

In the budget, Finance Minister Nirmala Sitharaman proposed to cut the customs duty on gold and silver from ten percent to six percent. Adding 5 percent AIDC or Agriculture Infrastructure and Development Cess, which remains unchanged, the total import duty on gold and silver has reduced from 15 percent to 11 percent.

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The reduction in gold customs should improve Titan’s growth outlook, noted Macquarie. The brokerage raised its FY26/27E EPS by one/two percent on the Rakesh Jhunjhunwala stock to factor in the customs duty cut.

Domestic brokerage Emkay Global concurred, saying that the duty cut-led moderation in gold prices will catalyze customers who have been on the fence as a result of the spike in gold prices.

While Titan might see a moderate Q1 due to a spike in gold price, lesser wedding days, and election-related operating challenges, the second half of this financial year is expected to be better because of the duty cut and better operating environment.

A likely accelerated shift of consumers towards the organized sector, moving away from the local players makes a strong case for valuation re-rating, Emkay added.

An age-old adage says no news is good news. No changes, updates or hikes in excise duty or NCCD (National Calamity Contingent Duty) are good news for the tobacco sector, especially India’s largest player: ITC.

Morgan Stanley said the Budget allayed one of the key concerns of tobacco tax hikes. ITC is extremely well-placed for sustainable growth, with strong business fundamentals. According to the brokerage, ITC is likely a re-rating play.

Jefferies India upgraded ITC to a buy rating, raising the target price to Rs 585 per share, foreseeing a 25 percent upside. The last tobacco tax hike was 2 percent in February 2023. This stability allows ITC to focus on volume with minimal price hikes, Jefferies said.

The brokerage further noted that GST taxes are expected to remain stable until March 2026 as the Centre settles state dues. Improving demand in the staple sector should benefit ITC's key businesses. The February 2025 Budget will be significant, but a modest price hike this year will lay the groundwork for next year.

About 90 percent of cigarette taxes fall under the GST regime (GST rate at 28 percent + compensation cess), earmarked until March 2026, to repay state borrowings, ensuring tax stability for the next 12-18 months.

Additionally, the outlook for the consumer staples sector is improving, which shall be a net positive for ITC as well.