Dec 10, 2022
ITC stock value moving to FMCG from cigarettes; proof, sharp rise after Budget 2023
ITC share price saw a volatile day of trade on Wednesday as a result of the tax hike in cigarettes, announced in Budget 2023. The ITC scrip saw a 6.6% fall intraday before soaring to touch a fresh 52-week high at Rs 365.65 on the BSE, up 3.7%. The tobacco giant continued to extend its gains on Thursday, gaining 7.4% over the course of two sessions. The share price traded at a discount of 0.5% at Rs 376.65 on Friday, ahead of its Q3FY23 earnings.
ITC shares rebounded on 1 February once the market calculated the overall tax increase will be a meager 2%. “Given the general inflationary environment and no-price hikes since the last two years, we believe ITC is likely to offset the impact of tax hike through selective price hikes,” ICICI Securities said. As a result of this, HDFC Securities stated cigarette companies like ITC and its peers may see a relief rally.
More experts and analysts are moving away from the view of ITC being solely a tobacco giant, and are now recognising its capacity across sectors, especially FMCG and hotels. As the Budget was announced, AUM Capital stated that the hike in agri credit target as well as the makeover of tourist destinations to be developed for tourists are positive for ITC.
“We expect the narrative around the ITC is getting strong on account of – 1) Stable cigarette volume growth led by market share gains and new product launches; 2) FMCG business reaching the inflection point as its EBIT margins expected to inch up from 7.7% in FY22 led by – effective implementation of WIMI strategy, driving premiumisation, leveraging technology on demand and supply side; 3) Strong and stable growth in hotels, paperboard, and agribusiness,” said Axis Securities.
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