ITC Ltd – Stock Analysis
Why is ITC Ltd Stock Falling? ITC Ltd stock has corrected by almost 10-12% from the last couple of weeks and hit its 52-week low 203.9 on 18th Feb, 2020.
Why ITC Ltd Stock is Falling – Negative Factors
The share price of ITC Ltd stock has been going down since announcement Budget 2020 and What is happening to ITC Ltd Share Price in the Stock Market and Why? In this article, we are going to discuss the positive and negative factor about ITC Ltd.
- The increase in taxes on cigarettes is on the back of an increase in National Calamity Contingent Duty (NCCD).
- NCCD in 2020 Budget was increased to Rs 44.5 paisa/stick for all segments which will result in a 14% increase in total tax per stick and in turn 5% downgrade to projected Earnings.
Why ITC Ltd Stock is Falling – Positive Factors
ITC Limited is an Indian multinational conglomerate company having headquarter in Kolkata, West Bengal. The company operates through 4 segments: FMCG; Hotels; Paperboards, Paper and Packaging; and Agri Business.
Business Verticals of ITC Ltd
- This is major contributor in the business of ITC Ltd. The company earns majority of their revenue form this business vertical.
- Their contribution to the revenues is still in the 40’s, but this business vertical’s contribution to EBIT is a staggering 85%. This is very interesting to analyse. This is tell us how much ITC is dependent on their cigarettes business. ITC is trying very hard to diversify their overall business, but they haven’t been much successful in doing that.
2. FMCG (excluding cigarettes)
- Cigarettes also are a part of FMCG but we have to present their numbers separately to get a clear understanding of their business.
- This business verticals contribution to revenue is pretty healthy, but I contributes very marginally to EBIT numbers. Here, too the company is trying very hard to grow.
The company also has many ITS hotels in domestic as well as international locations. This business vertical hardly contributes to the company’s EBIT.
4. Agri Business
The company is also involved in agricultural business. Though the revenue contribution is decent, EBIT contribution still disappoints.
5. Paperboard, Papers & Packaging
This business vertical of the company is performing comparatively better than the other business verticals (excluding cigarettes).
Cigarettes Business of ITC Ltd
- ITC has been a consistent revenue generator for ITC and it will remain the same in coming times as well.
- Tobacco products include raw tobacco, beedi, cigarette, gutka, kheni, pan masala. The total consumers of all these tobacco products in India are 27 crore+. Out of these, 10 crore consumers are of cigarette and beedi. And out of these, 80% of the consumers are the users of beedi and the rest 20% use cigarettes. Beedi is an unorganized kind off market. This mean that, there is a lot of opportunity for the company to grow more in their cigarettes business.
- ITC Ltd has a market share of more 80%.