ITC Gains After Maharashtra Keeps Cigarette Prices Unchanged

Source from:  sharekhan.com  02/27/2014

No VAT hike on cigarettes in Maharashtra state's  interim budget 2014-15 – sentimentally positive for  ITC, remains preferred pick in  FMCG space (one year price target is Rs369).　

Shares of  FMCG major  ITC gain over 1% on BSE after Maharashtra government did not hike VAT rate on cigarettes in its  interim budget 2014-15 announced on 25th February 2014.

Maharashtra contributes close to 10% to  ITC's cigarette sales volume. This positive for  ITC as even central government skips the tobacco products (including cigarette) from any excise duty hike in its Interim budget 2014-15 (declared on 17th February 2014).

The stock is currently trading ~25x its FY2015E, which is at discount to some of the mid-cap  FMCG stock. Hence in view of discounted valuations and strong cash flows, We maintain as our top pick in the  FMCG space and recommend Buy on the stock. Enditem