ITC shares flat in weak market

MUMBAI: ITC shares were trading flat in a weak market Tuesday, as investors consider the company as a safer bet in a deteriorating economic scenario because of its still-strong cigarette business.

Some analysts expect the company's cigarette business to bail out its loss-making venture--mainly consumer-- and the weakening hotel business. The company, which announced its December quarter Monday, reported earnings that were below market estimates.

���Defensive cigarette business coupled with strong balance sheet will, in our opinion, continue to support stock performance in the current bleak macro environment,��� Merrill Lynch said in a report before the earnings. The investment bank has reiterated its ���buy��� rating with a price target of Rs 187, even as it has cut EPS estimates for 2009-10 and 2010-11 due to weaker outlook for hotels and consumer business.

IDFC-SSKI Securities has reiterated its ���neutral��� rating on ITC, post December quarter earnings. ���Slowing down of growth and deteriorating earnings profile calls for a business de-rating. Notably, with consumer business growth coming off, the rationale of attaching a pure play consumer business valuation gets defeated,��� the institutional brokerage said in a report, while valuing the stock at Rs185.

���With 50% of its revenues and 80% of the capital employed towards heavy asset backed (hotels and paper), non-value added trading (agri) or high loss making (FMCG) businesses, valuations of 17x FY10E is unjustified," it added.

At 12:50 pm, ITC shares were marginally lower at 170.45, while the Sensex was at 9,081.64, down 247.93 or 2.66%.