ITC rises 3%; Credit Suisse bullish, noodles market share gains

Moneycontrol Bureau Shares of ITC rose 3.4 percent intraday Monday. Credit Suisse maintains its outperform rating on ITC, stating that it can rejoice as most states have not hiked value added tax on cigarettes in Budget. Cigarette business, which is key revenue driver for ITC, has been reeling under four consecutive years of heavy tax increases and has seen a 16 percent dip in cigarette volumes over the past two years. "Three states - West Bengal, Tamil Nadu and Kerala—have presented interim budgets as they are going into elections. The new governments will most likely present Budgets in June where there could be a possibility of a hike," it says in a report. According to the brokerage firm, FY17 is likely to be one the lowest VAT hikes seen by ITC in the past five years. "The excise hike of 10 percent this year is also manageable in our view and the lowest in five years," it adds.  In his Budget proposal for FY17, Finance Minister Arun Jaitley hiked excise duty on cigarettes to 10-15 percent but that did not deter any sentiment. The magnitude of excise increase for cigarettes is not as steep as compared to prior excise hikes.Credit Suisse expects ITC’s margins to expand and EBIT growth to move back into double digits.Another positive development which is boosting the stock is its market share expansion in noodles segment. The FMCG major said sales of its instant noodles brand Yippee are recovering and its market share has risen to anywhere between 30 and 40 percent.At 10:34 hrs ITC was quoting at Rs 333.85, up Rs 8.85, or 2.72 percent on the BSE. Posted by Nasrin SultanaFollow @NasrinzStory