ITC - Muted Cigarette Volumes; Other FMCG Margin To Remain Under Pressure: Motilal Oswal
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Motilal Oswal Report
Tapering in-home consumption and sharp commodity cost inflation could affect ITC Ltd.'s strong Ebit growth in the other fast moving consumer goods segment, preventing the contribution of cigarettes in overall Ebit to decline much (likely to reduce to ~80% in FY23E which is still within its ten-year range of 80-86%).
Cigarette volumes for ITC and even other players globally have been on a declining trend, given the increased health consciousness among consumers over the last decade.
With the government having recently (October 2021) set up an expert panel tasked with preparing a comprehensive tax policy proposal for all forms of tobacco from a public health perspective, the overhang of a policy change that may affect cigarette volumes remains on the stock.
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