IndiaInfoline research is bullish on ITC and has recommended buy rating on the stock in its January 21, 2008 report. “Despite higher excise burden and sharp price hike we expect ITC to have recorded a decline of less than 2% in cigarette volumes during the quarter. We believe the higher prices to get successfully absorbed by the industry and ITC’s cigarette volume decline would significantly reduce in the coming quarters. We expect the company to record flat volume growth during FY08. Outlook for the non-cigarette businesses such as hotels and paper remains positive with continued demand buoyancy. The other FMCG businesses are also expanding rapidly, while losses are being gradually curtailed. With the entry into the personal care category, we expect ITC to become a tough competitor for HUL and GCPL, given its strong distribution network in the rural (~6,400+ e-choupals and 21 Choupal Saagars) and urban markets. Also, strong cash flows from cigarette business can be invested in advertising heavily to build the personal care portfolio in the initial stage. At the current market price of Rs213, the stock is trading at 18.5x FY10E EPS of Rs11.5 per share. We maintain BUY on the stock with a revised price target of Rs 264, an upside of 24%,” says IndiaInfoline research report.
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