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Customs duty hike boosts footwear stocks, Liberty up ~5%

Footwear stocks were buzzing on the bourses in late morning trade on Thursday after the central government, on Wednesday evening, hiked basic customs duty (BCD) on footwear from 20% to 25%. This hike will provide more price competitiveness to local players.

The government has hiked basic customs duty on the imports of 19 consumer goods in a bid to narrow the widening current account deficit. This hike in basic customs duty (BCD) would be effective from Thursday, September 27, 2018.

Reacting to the news, Liberty Shoes gained ~5%, Mirza International gained ~2.5%, Sreeleathers gained 23%, and Bata India rose ~2% on the BSE.

The hike in BCD on footwear from 20% to 25% will provide more price competitiveness to local players like Liberty Shoes, Bata India, etc. A price hike of as much as 2-3% can be expected from domestic footwear players. Further, any price hike will directly be reflected in the bottom line without an increase in the cost.

Even if the domestic players do not undertake a price hike, their volumes are likely to pick up owing to better pricing compared to imported footwear. Hence, this will result in positive operating leverage for them and will also result in margin expansion to some extent.

Liberty Shoes share price is currently at Rs178.45, up Rs8.05, or 4.72%, from its previous close of Rs170.40 on the BSE.
Bata India share price is currently at Rs973, up Rs16.65, or 1.74%, from its previous close of Rs956.35 on the BSE.

Mirza International share price is currently at Rs89.50, up Rs1.95, or 2.23%, from its previous close of Rs87.55 on the BSE.

Sreeleathers Ltd share price is currently at Rs204, up Rs4.1, or 2.05%, from its previous close of Rs199.90 on the BSE.
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