According to MF daily, majority of tobacco producers and distributors (about 90%) call for legal action restricting pre-stocking of cigarettes ahead of excise tax hikes. Representatives met deputy Finance Minister this week and require at least simple modification of the bill stating: “Pre-stocking is forbidden”. Producers will commit to keep inventories only at common level and sell them for limited period of time, e.g. 3 months.
Our view:
As we already informed previously limiting pre-stocking would be benefiting for PMCR as it is unable to create comparable inventories to small producers, which then sell cheaper products for longer period than PMCR and thus hurts its market share. However time factor and political deadlock plays against the producers as they need to build-up their inventories ahead. We view this news as positive.