Todays headlines has been the 13% drop in ITC stock – as an unexpected cess is expected to affect the bottomline. So the mood of the day is SELL SELL SELL. And thats how the market operates – knee jerk reaction. The impact of higher Taxes on ITC is a regular phenomena – Cigarettes are one of the highest category Tax products in the country – and the stock always bounces back to new highs. This is the perfect time to look at the history of the stock.
ITC is one of the best buys in the market. And with a 13% drop – this is a great opportunity to get into the stock. Every long term investor must have this in their portfolio.
Not many know that ITC’s FMCG business, which includes packaged food, personal care and education stationary products, crossed the Rs 10,000 crore revenue milestone in 2016-17 with sales growing by 8% to Rs 10,511.83 crore. Thats colossal and with a fast growing India – consumption stocks like ITC will continue to grow rapidly.
India has over 100M Smokers. By 2015, there were roughly equal numbers of men smoking cigarettes or bidis. About 11 million women aged 15–69 smoked in 2015. The absolute numbers of men smoking any type of tobacco at ages 15–69 years rose by about 29 million or 36% in relative terms from 79 million in 1998 to 108 million in 2015. This represents an average increase of about 1.7 million male smokers every year. Habits die hard – and whatever be the price consumption will continue to grow. As affluence steps in more Bidi smokers will switch to Cigarettes. Legal cigarettes constitute only 11% of all tobacco usage in India and the per capita consumption of Cigarettes in India is one of the lowest in the world.
(Source – Trends in bidi and cigarette smoking in India from 1998 to 2015, by age, gender and education – http://www.cghr.org/wordpress/wp-content/uploads/low_bmjgh-smoking-trends-paper.pdf
Lets look at the story in some simple visuals and question the knee jerk reaction
ITC Crashes on July 17th – Panick button – everyone is in sell mode – headlines scream of thousands of crores of losses – mostly notional.
Now look at the ten year graph and how ITC has given annualised returns of 18.6% beating the Sensex handsomely
Even in a 2 year period the stock has gone up from 190 to 280 ( after rallying to 350) and remember the 280 price is post Split.
Talking of Bonus – this is one stock that gives you Bonus with regularity every 5 years
And here is the company performance track record over the last 20 years – a tough one to beat and with Consumption and growth in India accelerating things can get only better.
So make the most of it – remember every great stock gives you an opportunity to enter and this is the time to BUY ITC.