ITC not a sell, is cheapest consumer stock now: UBS

NEW DELHI: Shares of ITC tumbled nearly 5 per cent in trade on Monday, in addition to 8 per cent fall on Saturday. A section of market has turned negative on the stock. This included the foreign brokerage CLSA. But, should you exit the counter?

No, says Sunita Sachdev, consumer analyst-India at UBS .

Sachdev says, "ITC is amongst the cheapest consumer stocks now. It is at 21 times FY17. This sector is trading at 32-33 times. The earnings growth of ITC still stays resilient at 15 per cent to 17 per cent over FY16-17. So, this is the time to buy this stock if you have a one, one and a half year view."

Shares of cigarette manufacturer ITC extended losses for second straight session on Monday reacting to excise duty hike on cigarettes."

"We have had a relook on ITC over the weekend and we now expect 5-6 per cent decline in volumes for FY16 and we have also cut our earnings in a smaller fashion by around 2-3 per cent because we are also expecting a huge mix upgrade to take through because micro filters which have seen a 25 per cent increase in excise duty and the assumption underlying is that they would pass on the price increases means that these smaller size cigarettes will see a bigger hit than the king size and the regular size filters," Sachdev said.


So your volumes may decline by 5 per cent, but there is a huge mix upgrade which will ensure that earnings decline only 2-3 per cent, she added.