HSBC upgrades ITC from 'Neutral' to 'Overweight'
HSBC believes the impact of poor monsoon on ITC will be minor and stretched over a long period.
By ET Bureau |
ITC
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: Rs 227
HSBC upgrades the rating on ITC from `Neutral��� to `Overweight��� on valuation. FMCG stocks have dropped on rainfall concerns; so has ITC, despite no correlation between cigarette sales and monsoon. There is concern that competition will increase for ITC as Marlboro cigarettes, earlier available via imports, will now be produced and distributed locally, by Godfrey Phillips India.
HSBC believes the impact on ITC will be minor and stretched over a long period. If this happens, ITC has the flexibility to offset it with price increases without affecting volumes meaningfully. The company has already implemented an average price increase of 5% (Bristol and Goldflake Kings prices taken up 10-20%) which is factored into the forecasts.
The potential for price increase on other brands (Scissors, Navy Cut, Capstan), which represent a third of sales and which have seen no price hikes for over two years, represents scope for EPS upside of 5% on an annualised basis in the estimates.
RESEARCH: HSBC
RATING: OVERWEIGHT
CMP: Rs 227
HSBC upgrades the rating on ITC from `Neutral��� to `Overweight��� on valuation. FMCG stocks have dropped on rainfall concerns; so has ITC, despite no correlation between cigarette sales and monsoon. There is concern that competition will increase for ITC as Marlboro cigarettes, earlier available via imports, will now be produced and distributed locally, by Godfrey Phillips India.
HSBC believes the impact on ITC will be minor and stretched over a long period. If this happens, ITC has the flexibility to offset it with price increases without affecting volumes meaningfully. The company has already implemented an average price increase of 5% (Bristol and Goldflake Kings prices taken up 10-20%) which is factored into the forecasts.
The potential for price increase on other brands (Scissors, Navy Cut, Capstan), which represent a third of sales and which have seen no price hikes for over two years, represents scope for EPS upside of 5% on an annualised basis in the estimates.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
