ValuePickr Forum

ITC: "Will"(s) "Gold Flake" assist "Ashirwad" to win "Bingo!"?

Thanks every members to meaningfully contributing with their and nearby experience. However, let us concentrate on core subject of investing. Given that in recent lockdown, we find two state have classify liquor as essential.

In that context and given the amount of revenue generated by Cigarette, I feel Cigarette would continue to see higher taxes allowed to be sold to the people at large. Being addictive, there is reasonably strong pricing power with Cigarette companies in my view.

Discl: Same as last message. view may be biased due to holding. Purchase 10% of quantity hold last week.

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A win win situation for both ITC & Jubilant foods, zero contact delivery of essentials from ITC by Domino’s

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I’m evaluating this company for the first time. Can someone help me with a few details?

  1. What % of and profits split between Cigarettes, FMCG-Other and Hotels is ITC targeting for a few years down the line?
  2. What will the FMCG-other margins look like once they have ramped up their brands? Is it fair to say their operating margins will be similar to that of HUL or Nestle?

All the information available and discussed in the thread already. please go through

and other posts… no one can be sure of future… but looking back at HUL and Britannia history they also had long period of product gestation before higher margins…

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Company hasn’t provided shareholding information for March 2020 quarter yet.

Monthly-Portfolio-march-2020.xls (154.5 KB)
March 2020 holdings fördert PPFAS - ITC is a core holding.

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Cigarette business would deter ESG investors and reduce the number of buyers. However, being carbon and water positive, environment friendly, waste management etc are net net ESG attractive. ESG has E as first, so I am guessing the company’s Environmental initiatives will take precedence over Social parts.

Disclosure : Have bought over 2500 shares of ITC since budget.

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As this crisis situation due to Covid-19 still continues to exist, economic projections pertaining to that remains gloomy. With no clarity on when that will subside, the slowdown can run deep and can last for many quarters to come. And when it comes to recovery, different sectors will have different recovery times.

When we talk of FMCG sector, few stocks such as HUL & Nestle have so far shown strong surge in stock price owing to the demand created by panic buying as a result of prolonged lockdown exercise to tackle the coronavirus situation. ITC however, could not replicate such a comeback surge in its stock price as compared to HUL & Nestle. But when we think of investment decisions in such uncertain times, utmost priority should be given to safety considerations and appropriate valuations for the sake of long term sustainability. For ITC Limited, this can be analyzed and talked upon when we draw a comparative landscape with HUL & Nestle, on the basis of few growth, safety & valuations metrics :

From the above chart we can see that ITC is lagging behind HUL & Nestle when it comes to growth metrics such as EPS growth and RoE growth. That means ITC has performed mediocrly on the earnings front for the last few years as compared to HUL & Nestle. However, when we consider from the Value Investing perspective, when we look for the more safer bargains (specially in these uncertain & volatile times) , ITC seems to score over HUL & Nestle with its lesser PE ratio and relatively much lesser Price to Book Value ratio.

Though debt-to-equity ratio for all three companies is almost zero when we consider another important safety metric viz Current Ratio, ITC seems to be doing far better than HUL& Nestle over the years as visible from the following chart :

The superior current ratio of ITC as compared to HUL & Nestle denotes that it has had much better operating financial health all these years which indicates that the company has enough financial resources to remain solvent in the short-term. A consistent current ratio (upward of 2) should make ITC relatively much better prepared to deal with payment and collection disruptions which are highly likely owing to the prolonged lockdown.

Also, a substantial cash balance and large liquid investments on its books come as a strong source of financial flexibility for the company in times of economic downturns. However, from the long term perspective ( keeping aside the crisis concerns) how well the management utilizes these cash & investment proceeds for brand building for ‘FMCG Others’ vertical need to be seen.

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Is this a red flag?
17,66,516 shares were sold by insiders at an average price of Rs 186 in the last 3 months.
Selling by insiders at low price makes me very uncomfortable

Few of the Linkedin Profiles of the guys, who have been selling

  1. One of the senior vice president Anil Rajput has been in the company since last 44 years, why would he sell at lower price?
  2. Head of manufacturing, Rahul Gouraha, has been working there since last 15 years
  3. CV Sarma, Vice president finance

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The company is one of very few corporate which have lenient ESOP policies. Many higher position individuals sell the holdings to buy new ESOP which are in the money. Not checked on an individual you mentioned, but my post provide details over last 12-14 years ESOP by employees. Please go through the thread to get more information. I personally do not see any major negative.

Discl: same as previous post, bought some more share during last 15 days. View may be biased.

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ITC has discontinued ESOP policies and has given a one time hike to employees around 1 year back. This was done to pressures created by BAT

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This is so normal with companies that provides ESOP to its employees… check HDFC also. you will see frequent insider trading… Its because all employees sell/redeem their shares for their personal needs. One shouldn’t read too much into it.

Just for sake of completion I attach the HDFC insider trading

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Totally agree - these guys are managers, not owners…or to put in a different way they don’t have owners mentality…

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Hi Ashwani,Could you let us know source of this info ?

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Being evolved as a well established diversified conglomerate , ITC seems to offer a lot as a potential stock investment. With the credential as a notable dividend player with stronger balance sheet metrics, it has sustained greater financial health over the years. This was primarily due to its ability to churn its resources to good effect to yield optimized operating performance and to generate positive free cash flow over the years on a sustained basis :

A strong distribution channel and better rural penetration across the country coupled with well thought of diversification strategy has helped ITC in reducing its debt to near zero and also to produce improved operating cash levels in sync with the net income over the years as seen in the following chart :


Apart from the free cash accumulated over the years, ITC has generated healthy returns from its investment portfolio as well. This substantial amount of cash & liquid investments will thus play a key role in the company’s strategy towards exploring inorganic growth opportunities wherein inquiries received from market participants are suitably evaluated. This should, therefore, help in laying the foundation for significant scale-up in the non-cigarettes business in the coming years.

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