Macquarie Says ITC Hikes Cigarette Prices; Stock Up
Cigarettes account for 60 percent of ITC’s total gross revenue.
Shares of ITC Ltd. rose as much as 2.2 percent after brokerage house Macquarie said the tobacco products maker hiked price of cigarettes to compensate additional cess levied under the Goods and Services Tax (GST) regime.
Asia’s second-largest cigarette maker hiked weighted average price by 7 to 8 percent, according to the broking firm’s channel checks. The GST Council had announced an additional cess on cigarettes depending on the length on July 17.
Total price increase for the cigarettes segment stands at 15 percent, according to the brokerage report.
Also Read: Tobacco Tax U-Turn Burns $7 Billion Hole in ITC's Market Cap
Segmented Increase In Prices
- 84 mm Segment (Gold Flake Kings and Classic): +7 percent to Rs 15 per stick.
- 69 mm Segment (Gold Flake franchise): +6-11 percent.
- 64 mm Segment (Gold Flake Superstar and Gold Flake Century): Around +9 percent
- Other 64 mm brands: Bristol’s price increased 20 percent to Rs 6 per stick while Capstan price remains unchanged
While volumes may be impacted owing to the price hikes, Macquarie is not building in any decline in financial year 2017-18 owing to phased increase as the economy improves.
It maintained its ‘Outperform’ rating on the stock, with price target of Rs 340 each. The stock has lost 12 percent in the last two weeks, compared to a over 2 percent gain in the NSE Nifty Index.
