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Neutral impact on ITC due to hike in VAT rates on cigarettes by few states
The West Bengal Government has recently increased VAT on cigarettes from 13.5% to
20%. According to media sources, Andhra Pradesh (AP) Government is also expected to
hike VAT on the same lines of West Bengal. The current VAT rate on cigarettes in AP is
14.5%. We believe this hike in VAT rates will have a neutral impact on ITC’s volume
growth and do not expect the company to take price hikes in the near term, as it had taken
price hikes before Budget 2011. Also, since there was no hike in excise rates during Budget
2011, hike in VAT rates by states was expected. At the CMP, the stock is trading at 23x
FY2013E EPS. We maintain our Neutral rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Neutral impact on ITC due to hike in VAT rates on cigarettes by few states
The West Bengal Government has recently increased VAT on cigarettes from 13.5% to
20%. According to media sources, Andhra Pradesh (AP) Government is also expected to
hike VAT on the same lines of West Bengal. The current VAT rate on cigarettes in AP is
14.5%. We believe this hike in VAT rates will have a neutral impact on ITC’s volume
growth and do not expect the company to take price hikes in the near term, as it had taken
price hikes before Budget 2011. Also, since there was no hike in excise rates during Budget
2011, hike in VAT rates by states was expected. At the CMP, the stock is trading at 23x
FY2013E EPS. We maintain our Neutral rating on the stock.
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