ITC cigarette price to hike by 10-15%
Mumbai: Volume growth at India’s largest ITC cigarette maker likely to take a hit as Finance Minister Nirmala Sitharaman proposed higher levies on cigarettes. As well as on other tobacco products she proposed higher levies in the Union Budget on Saturday.
Besides, on Saturday, ITC’s stock tanked 7% as it recorded the biggest one-day decline since July 2017. Also, it came up as the biggest laggard on the Sensex.
However, Credit Suisse said this might require ITC to take a 10-15% price hike. So then, in a weak macro environment, it might cause a high single-digit volume decline. Although, even after taking price hikes of over 10%, yet, cigarette EBIT remains flat in the best case in FY21.
Despite this, ITC’s cigarette business, which accounts for three of every four cigarettes sold legally, allegedly reported a 4.7% growth in revenue. So then, this growth came about in the December quarter at Rs 5,310.98 crores. Hence, the net profit of the company for the period remained up by 29% at Rs 4,141.93 crores.
Besides brokerages, Phillip Capital and Edelweiss have downgraded the stock following the budget, estimating a 6-7% hike in cigarette prices by ITC.
Moreover, the NCCD component has come up increased by 2-4% across stick sizes. Hence, this has resulted in tax hikes in the range of 9-15%. Besides, the tax hikes, in effect, at the portfolio level might remain 11%.