ITC deserves to be King Size!

protrade

Well-Known Member
#1
The recent farm bills have potential to change the complete landscape of agriculture in India. And ITC, is easily the most trusted corporate, pretty much throughout the country, as far as farmers are concerned.

They have invested consistently in the Agri-economy and have supported the farming community with e-choupal, etc.

I think the time is perfect to enter into ITC.

It’s a diversified conglomerate, with a strong defensive positioning because of cigarettes. It’s hotel and lifestyle business has been hit by Corona, and that’s the reason for current weakness in stock. It’s agri businesses have evolved during the lockdown, with door step delivery, etc.

On the whole, valuations are looking reasonable, dividend yield is excellent, and a trigger like the farm bill is excellent entry point.
 

protrade

Well-Known Member
#2
Yesterday’s decision by the GST council - that additional taxes will continue beyond 2022 for cigarettes and luxury cars is seen as a negative for ITC.

However, when entire market was expecting increase in additional taxes, just continuing with these taxes is actually a positive!

But more importantly - June quarter results show that cigarettes are now just a third of ITC. With FMCG, Agribusiness and paper boards together almost doubling the contribution from cigarettes.

With expected rapid growth in FMCG, and farm bill giving dramatic boost to agribusiness, I expect cigarettes to drop to 25% in another 18 months time. Especially because hospitality will also recover by that time.

By 2022, ITC can say, “We also make cigarettes” - that is how well their diversification strategy is playing out.

ITC has a distribution network that puts even HLL’s famed network to shame, reaching every Paan shop in every corner of India. And they are leveraging that network to the hilt in FMCG already. Their entire agribusiness strategy was predicated around filling the trucks that otherwise return back empty - and this strategy will take-off in an even better way post the new farm bill.

ITC’s diversification story in moving away from cigarettes is an even better story than the turn around scripted by Reliance moving away from Oil/Chemicals. The synergies in ITC diversification are far better than the synergies in Reliance - because they are leveraging their existing distribution network to the maximum.

Reliance was also floundering for years, till market woke up to what was happening. ITC is just as spectacular a story.
 
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