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ITC (Marlboro launch: no fire (yet), BUY):
We recently met ITC’s management and came out even more positive on all its key businesses. ITC’s volume growth in cigarettes continues to accelerate QoQ, and the launch of the lower-priced Marlboro cigarette in two key cities has not affected the company’s offtake there over the past two months. We reckon the company’s FY12 EBIT margins from cigarettes will benefit from the c10% decline in domestic tobacco prices as against a 20-40% increase in the past two years. FMCG losses continue to decline, as profits from Foods are growing sequentially. We expect ITC to register 19% earnings CAGR over FY10-13ii and retain BUY.
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