India: ITC Hikes Cigarette Prices by 13-20%

Source from:  Sharekhan.com  03/28/2014

FMCG major ITC increased Gold Flake Premium and Classic brand cigarette prices by 13-20%- positive development (however, we downgraded the stock to hold yesterday due to 17% appreciation in five weeks and limited upside; look to re-enter around Rs340-345 level).

As per our recent channel check, ITC has increased the Gold Flake premium (84 mm size) prices by 13% to Rs85 for pack of 10 cigarettes, while it has increased the Classic brand of cigarettes (84 mm size)  by 20% to Rs180 for pack of 20 cigarettes with new packaging.

Though new packs are yet to be available in the market, the retailers are selling both the brands cigarette at Rs9 per stick. These two brands contribute close to 15% to ITC's overall cigarette sales volume.

Since these two brands are in premium range, we don't expect the recent price hike to have any significant impact on the sales volume of these two brands, but will aid in further margin improvement of ITC's cigarette business (contributes more than 80% to ITC overall profitability) in the coming quarters.

At 11.50 am, ITC was trading at Rs356.20, down by 0.61%, with a volume of 1.32 lakh shares on the BSE. Enditem