ITC shares rose 2% to Rs 233.20 in intraday trading on Wednesday, gaining up to 6% in the last two trading sessions, after the government in the 2022 budget proposals failed to not touched the excise duty on cigarettes. Stable taxation on cigarettes may contribute to volume growth for cigarette manufacturers, which have been one of the industries most disrupted by the Covid-related disruptions.
Fast-moving consumer goods (FMCG) cigarette stock rose for the sixth consecutive trading session. Over the past week, the stock has outperformed the market, jumping 9% against a 3% rise in the S&P BSE Sensex.
In the meantime, ITC’s board of directors is scheduled to meet on Thursday, February 03, 2022 to review and approve the company’s financial results for the three and nine months ended December 31, 2021. The board will also consider the statement of interim dividend for the year ended March 31, 2022.
At its analyst meeting in December, ITC highlighted its growth initiatives across all divisions and expects to deliver double-digit growth going forward. It highlighted better recovery trends in cigarettes after the second wave of Covid-19 and gained 100 basis points in market share. Feedback indicated an improving mix, with stability in the tax regime and continued innovation, complemented by strong last-mile execution, the Emkay Global Financial Services analyst said.
“ITC is expected to experience revenue growth of 6.7% thanks to the recovery of hotels and cardboard-related activities. Additionally, cigarette volumes are expected to grow around 5% due to the normalization of out-of-home activity,” ICICI Securities said in the third quarter earnings preview.
Strategy update, stable taxation for the cigarette sector, tailwinds for the FMCG sector, use of data analytics, expanded distribution and cost optimization through supply chain interventions and smart manufacturing are key positives. Reasonable valuations make the stock more attractive, the Centrum Broking analyst said.