Company’s Name ITC

Recommendation Buy

Market Price 169.90

Buy Price 170

Target Price 180

Stop Loss 166

Time Span Till 2nd week of January 2011

Company’s introduction

ITC was incorporated as a private limited company under the name Imperial Tobacco co.
on 24th august 1910. The company manufactures and distributes cigarettes and smoking
tobaccos. Other activities include tobacco leaf processing, printing and packaging, hotels,
food and export.

Investment rationale

1) ITC forayed in to the fairness cream market in july 2010. Total fairness
cream market is estimated to be around 1700 crore and is growing at the rate of
14%. We expect that the company will generate huge revenue from this growing
segment.

2) ITC’s volume growth in cigarettes has increased QoQ. Launch of lower

priced Marlboro Cigarettes in two cities has not affected the company over the
past 2 months.

3) We expect that the EBIT margins of the company will benefit from 10%
decline in tobacco prices as against 20 to 40% increase in the past 2 years. This
will reduce the input cost of the company for its major product.

4) Cigarette business contributes around 50% to the company and the cash
generated can be used for other businesses which are at its nascent stage.
5) Also company’s other businesses like hotels, agricultural products, non
cigarette FMCG goods are expected to maintain their strong growth momentum in
the coming quarters. Hence we believe that it’s a good stock to buy.