The discount between India's two largest consumer goods makers is the highest in at least 13 years.
ITC Ltd. is currently trading at 19 times its estimated 12-month forward price-to-earnings. That's at a 65 percent discount to Hindustan Unilever Ltd.'s Bloomberg estimated forward PE, the most since at least 2006. Bloomberg data for ITC is available only from 2006.
That, according to brokerages CLSA and Kotak Institutional Equities, is because of a potential for higher taxation on cigarettes and poor performance of non-cigarette businesses of the nation's second-largest fast-moving consumer goods company by market value.
Credit Suisse said ITC has seen a derating despite improving operational performance. The brokerage now expects the cigarette-to-hotel conglomerate's stock to outperform among FMCG peers in the next 12 months.
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