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Apr 18, 2013, 06.27 PM IST | Source: Moneycontrol.com

ITC hits life high! Should you buy?

Shares of cigarettes to hotels major ITC gained over 1 percent and hit a life high of Rs 316.50 on NSE on Thursday as value buying continued in the counter. The stock has gained over 9 percent since Dec 2012-end.

Moneycontrol Bureau

Shares of cigarettes to hotels major ITC gained over 1 percent and hit a life high of Rs 316.50 on NSE on Thursday as value buying continued in the counter. The stock has gained over 9 percent since Dec 2012-end.

Kaustubh Pawaskar of Sharekhan says one could still consider the stock, but it would be a good buy if it corrects to Rs 290-300. If the stock hits Rs 320-325, then upside would be limited, he added.

The stock has been on a roll in the past few sessions amid price hikes across several of its cigarette brands.

ITC has recently raised price of Gold Flake Kings by Rs 20 per pack of 20 cigarettes. Price of Wills Navy Cut has been increased by Rs 10 per pack of 10 cigarettes. The price hikes are in the wake of the excise duties raised in the Union Budget. Several states too have raised taxes on cigarettes and other tobacco products.

According to a recent report by Morgan Stanley, the Kolkata-based firm has taken 19-20 percent effective price hike for first half of FY2014, which would be sufficient to drive earnings growth above the brokerage's India consumer sector average.

The price hikes taken by the company usually tends to hurt volume growth in the near-term, but recovers over time. Morgan Stanley expects ITC's cigarette volumes will decline 2 percent in FY14.

Meanwhile, ITC's non-cigarette FMCG business has also been doing well and is also expected to report lower losses in the fourth quarter. 

"We expect the overall YoY sales growth to be 12-13 percent in Q4, led by strong performance in cigarette (on the back of price hikes) & other FMCG. Cigarettes business is likely to witness a volume growth of 1.5-2 percent despite steep price hikes undertaken," HDFC Securities said.

Other FMCG business is expected to clock over 20 percent growth, and the cigarette price hikes coupled with the decline in other FMCG business loss will boost margins, it added.

ITC shares were trading flat at around Rs 313 in afternoon trade.

ITC stock price

On December 19, 2014, ITC closed at Rs 369.50, down Rs 5.15, or 1.37 percent. The 52-week high of the share was Rs 400.00 and the 52-week low was Rs 310.45.


The company's trailing 12-month (TTM) EPS was at Rs 11.61 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 31.83. The latest book value of the company is Rs 32.89 per share. At current value, the price-to-book value of the company is 11.23.

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