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Our channel checks reveal ITC has raised prices of some its brands like Capstan and Benson &
Hedges by 12% and 9%, respectively. These brands would account for 5% of ITC's revenue
sales. We believe these hikes partly neutralise the recent VAT tax increases.
ITC makes calibrated price hikes
We hear from our channel checks that ITC has raised prices of some its smaller cigarette
brands- Capstan and Benson & Hedges. It has raised prices of Capstan by 11%, and that of
Benson & Hedges by 9%.
We estimate these brands collectively would account for around 5% to ITC's overall revenue
sales.
Price hikes largely to neutralise the VAT hike impact
ITC has faced sharp hikes in Value Added Tax (VAT) rates in a few states like Tamil Nadu,
West Bengal and Andhra Pradesh, where VAT rates were raised from 13-14% to 20%
These states are significant contributors to ITC's revenues, and hence, ITC has been forced
to raise prices to neutralise the impact.
It may be recalled that ITC had raised prices of Classic and Goldflake Kings in August 2011,
and Wills Navy Cut in September 2011.
We expect ITC to report a 15.3% PAT growth in Q2FY12
As per our channel checks the underlying volume momentum in ITC's cigarette business
remains strong at 7-8%. Since, these price hikes have been fairly calibrated, and given ITC's
portfolio of brands across price points, we see limited impact of the same on underlying
volume growth. We expect FY12, volume growth of 6%.
We expect a 15% EBITDA growth in ITC for 2QFY12, and a PAT of Rs14.4bn, which would
be growth yoy of 15.3%.
We remain positive on ITC, and maintain our Buy recommendation, given the good visibility of
earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Our channel checks reveal ITC has raised prices of some its brands like Capstan and Benson &
Hedges by 12% and 9%, respectively. These brands would account for 5% of ITC's revenue
sales. We believe these hikes partly neutralise the recent VAT tax increases.
ITC makes calibrated price hikes
We hear from our channel checks that ITC has raised prices of some its smaller cigarette
brands- Capstan and Benson & Hedges. It has raised prices of Capstan by 11%, and that of
Benson & Hedges by 9%.
We estimate these brands collectively would account for around 5% to ITC's overall revenue
sales.
Price hikes largely to neutralise the VAT hike impact
ITC has faced sharp hikes in Value Added Tax (VAT) rates in a few states like Tamil Nadu,
West Bengal and Andhra Pradesh, where VAT rates were raised from 13-14% to 20%
These states are significant contributors to ITC's revenues, and hence, ITC has been forced
to raise prices to neutralise the impact.
It may be recalled that ITC had raised prices of Classic and Goldflake Kings in August 2011,
and Wills Navy Cut in September 2011.
We expect ITC to report a 15.3% PAT growth in Q2FY12
As per our channel checks the underlying volume momentum in ITC's cigarette business
remains strong at 7-8%. Since, these price hikes have been fairly calibrated, and given ITC's
portfolio of brands across price points, we see limited impact of the same on underlying
volume growth. We expect FY12, volume growth of 6%.
We expect a 15% EBITDA growth in ITC for 2QFY12, and a PAT of Rs14.4bn, which would
be growth yoy of 15.3%.
We remain positive on ITC, and maintain our Buy recommendation, given the good visibility of
earnings.
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