Strong Third Quarter Could Boost ITC Stock, No Increase on Cigarettes
Since the introduction of the funds, the ITC stock has increased by more than 6% on the back of no change within the tax burden upon cigarettes.
It looked like the funds would effectively grab the thunder from ITC’s December quarter results, which are set to be released on Thursday. But, the rebound in the ITC stock has been given extra fuel in the near term, thanks to the company’s strong performance in the 3rd quarter, which was boosted by a low base.
It looked like the funds will effectively steal the thunder from ITC’s December quarter results, which are set to be released on Thursday. Nevertheless, the rebound in the ITC stock has been given extra fuel in the near term, thanks to the company’s strong performance in the third quarter, which was boosted by a low base.
Performance of ITC stocks
Even though ITC was underperforming for quite a long time, Motilal oswal, who is a Mumbai stockbroker, feels that the company’s stock price will remain stagnant at current levels. Given the rising health consciousness amongst customers over the last decade, the brokerage believes that ITC’s stock would not rise because its volume of cigarettes, as well as those of other global competitors, had been on a downward trend.
Furthermore, with the government recently establishing an expert group tasked with developing a comprehensive plan of tax policy for all types of tobacco from a perspective of public health, the risk of a change in policy affecting cigarette volumes hangs over the stock.
“Tapering in-home consumption and sharp commodity cost inflation could affect strong EBIT growth in the other FMCG segment. Preventing the contribution of cigarettes in overall EBIT to decline much (likely to reduce to ~80% in FY23E which is still within its ten-year range of 80-86%). The rumored demerger of ITC Infotech, even at ₹200 to ₹250b, is only 6-8 percent of ITC’s current market capitalization and is partly factored in the price already,” research experts Krishnan Sambamoorthy as well as Dhairya Dhruv, at Motilal Oswal, said as much in their analysis.