Analysts maintain 'buy' as ITC beats street in Q3
Several analysts on Monday maintained a "buy" or equivalent rating on ITC after the cigarettes to FMCG and hotels major reported a forecast beating 21 percent year-on-year rise in third quarter net profit.
January 21, 2013 / 20:21 IST
Moneycontrol Bureau
Several analysts on Monday maintained a "buy" or equivalent rating on ITC after the cigarettes to FMCG and hotels major reported a forecast beating 21 percent year-on-year rise in third quarter net profit.Net sales growth of 23 percent was also higher than street expectations.The market particularly cheered the growth in its non-cigarettes FMCG business, which continues to grow stronger each quarter (up 30 percent in Q3) and is expected to break-even in early FY2014."Traction in the FMCG business continues to be strong and slightly ahead of our expectations. We continue to like the stock for its steady growth and profitability," said Rajasa Kakulavarapu and Govindarajan Chellappa of Jefferies India."Revenues growth was almost equally split between volumes and mix/pricing. New products/renovations and market share gains have buttressed volume growth. We
maintain our view that the business momentum is likely to sustain - scale, cost efficiencies, better realizations/mix enhancements, innovations and supply chain efficiencies will drive profitability going forward," said Jamshed Dadabhoy and Aditya Mathur of Citigroup.Apart from the non-cigarette FMCG business,, cigarettes too continue to do well. ITC's cigarette volumes saw marginal growth of around 1 percent last quarter, but the price hikes it took to offset rising duties and taxes, helped boost segment revenue by 13 percent. "ITC remains one of our top picks in the sector given the strong resilience in its core cigarette business. We believe, with the ban on gutka and paan masala by almost six states, some demand will shift from these tobacco products to cigarettes, which will partly help ITC improve cigarette volume growth," said Vanmala Nagwekar of IIFL India Private Clients.The company has launched a 64 mm cigarette, after the government increased duties on 70 mm sticks. Analysts say the initial response has been encouraging and could contribute to volume growth going forward. Meanwhile, its that time of the year when the market becomes apprehensive regarding a possible hike in excise duty on cigarettes in the Union Budget, which is just over a month away. However, after a huge hike last year, this time around excise duty is only likely to be moderately hiked, feel Rohit Chordia and Amrita Basu of Kotak Institutional Equities.ITC, in any case, has mostly managed to pass on such duty hikes in the past and this time around too the company has already started taking calibrated price hikes across brands and so the Kotak analysts are not overtly worried.Citigroup, Jefferies and IIFL, have a "buy" rating on the stock, with a target price of Rs 340, Rs 334 and Rs 327 respectively. Kotak recommends investors "add" ITC shares with target price of Rs 330.ITC shares were up 1.2 percent at Rs 290.80 on NSE in afternoon trade on Monday. The stock has gained 28 percent so far this financial year.Also Read: What lies ahead for Reliance Industries after Q3Nachiket Kelkar
nachiket.kelkar@eetwork18online.com Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
