India: Strong Cigarette Volumes Keep ITC Shares Ticking

Source from:  NDTV 05/21/2013

Shares in ITC, India's biggest cigarette maker, bounced back on Monday after most analysts gave thumbs up to the company's March quarter earnings reported on Friday. ITC makes four out of every five cigarettes sold in India. ITC shares traded 0.6 per cent higher at Rs 336.65 as of 1.21 p.m. after hitting a high of Rs 342.20 in morning trade. ITC's net profit jumped 19.5 per cent to Rs 1,928 crore for the quarter ended March 31, from Rs 1,614 crore a year earlier.

Here are some reasons why traders continue to bet on ITC:

1. Strong cigarette volumes: ITC's cigarettes business keeps going from strength to strength reiterating that the company is well on its course to attaining a steady 16-18 per cent operating growth in business over the medium term. The cigarette business reported revenue growth of 18 per cent, above Nomura's expectation. Sagarika Mukherjee, research analyst at SBICAP Securities told NDTV Profit that Q4 results were good, with cigarette volume growing at higher than estimated 3 per cent.

2.
ITC has pricing power: Some pressure in cigarette volumes is likely going forward because of price hikes, but consumers will eventually get used to the the prices, Ms Mukherjee said.

3.
FMCG business reported a profit for first time. Revenues grew 26 per cent, against Nomura's expectation of 22 per cent. Volume growth in soaps was at high single digits, ahead of industry. Enditem