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Its cigarette business, which dominates the category, continues to be a cash cow for ITC. The company
endeavours to make a mark in the Indian FMCG market and with successful brands such as Bingo, Sunfeast and
Aashirwaad, ITC is already in the reckoning among the best in the industry. With the new portfolio of personal
care products gaining market share, its FMCG business promises to compete with the likes of Hindustan
Unilever and Procter & Gamble.
After a sharp increase of 16% in Union Budget FY10-11, the government has spared cigarettes from an excise
duty hike in the FY2012 budget. Also key states including (Kerala, Karnataka, Andhra Pradesh and Maharashtra)
have kept VAT on cigarette unchanged in their respective state budgets. We expect ITC’s cigarette sales
volume to grow at mid single digits in FY12.
ITC’ other businesses, such as hotel, agri, non-cigarette FMCG business and paper, paperboard and packaging,
are showing a strong up-move and will provide a cushion to the overall profit in FY11.
An increase in taxation and the government’s intention to curb the consumption of tobacco products remain
the key risks to ITC’s cigarette business over the longer term.
We expect ITC’s bottom line to grow at a CAGR of about 20% over FY10-13. At the current market price, the
stock trades at 23.4x its FY2012E earnings. We maintain our Buy recommendation on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Its cigarette business, which dominates the category, continues to be a cash cow for ITC. The company
endeavours to make a mark in the Indian FMCG market and with successful brands such as Bingo, Sunfeast and
Aashirwaad, ITC is already in the reckoning among the best in the industry. With the new portfolio of personal
care products gaining market share, its FMCG business promises to compete with the likes of Hindustan
Unilever and Procter & Gamble.
After a sharp increase of 16% in Union Budget FY10-11, the government has spared cigarettes from an excise
duty hike in the FY2012 budget. Also key states including (Kerala, Karnataka, Andhra Pradesh and Maharashtra)
have kept VAT on cigarette unchanged in their respective state budgets. We expect ITC’s cigarette sales
volume to grow at mid single digits in FY12.
ITC’ other businesses, such as hotel, agri, non-cigarette FMCG business and paper, paperboard and packaging,
are showing a strong up-move and will provide a cushion to the overall profit in FY11.
An increase in taxation and the government’s intention to curb the consumption of tobacco products remain
the key risks to ITC’s cigarette business over the longer term.
We expect ITC’s bottom line to grow at a CAGR of about 20% over FY10-13. At the current market price, the
stock trades at 23.4x its FY2012E earnings. We maintain our Buy recommendation on the stock.
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