*ITC: Company Update :* The company has raised a price of Gold Flake (cigarette) by 7% to 59 rupees from 55 rupees for a pack of 10 sticks, while that of Gold Flake Premium Filter has been raised to 58 rupees from 55 rupees. The company had taken a price increase of ~15% in this brand in April 2013 (total weighted average price increase across all brands was 16%) post the excise duty increase of ~18% in the budget. We believe the hike in cigarette this presents an opportunity for the Gold Flake consumer to upgrade as the price differential between Gold Flake regular filter and Gold Flake King-size narrows to Rs1/stick for a much better value positioning. We feel that the move is positive for the company as it will not impact the volumes much but will increase the EBIT growth for the cigarette segment going forward. We are positive on ITC due to its strong pricing power, improving return ratios, strong free cash flows and strong earnings growth visibility which is likely to support valuations.* We feel that ITC will sustain premium valuation owing to improving profitability in Other FMCG business and steady cigarette EBIT growth going forward. At CMP of Rs. 339 per share, the stock is trading at a PE of 30.6x FY14E & 26.3x FY15E. We maintain “HOLD” rating and our target price of Rs. 370 based on SOTP (FY15E).*
*Thanks & Regards,* *Equity Research (Retail) Department* *(Research Division of Nirmal Bang Securities Pvt. Ltd)* -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/globalspeculators. For more options, visit https://groups.google.com/groups/opt_out.
