HLL vs ITC which one should you hold?
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Comparing Stocks within the same sector
Forum Discription: Here we would discuss the various stocks that are available within the sector and provide insights on the better option.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=91
Printed Date: 03/May/2025 at 3:22am
Topic: HLL vs ITC which one should you hold?
Posted By: basant
Subject: HLL vs ITC which one should you hold?
Date Posted: 23/Jul/2006 at 11:06pm
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A question to ponder over. Why is there such a fascination for HLL? Company is reflecting highest RoE's (no scope for further increase) costs have been squeezed (little scope for further decrease) shifting balance of negotiation (the advent of large retailers will shift the bargaining power away from the FMCG guys, till now they were negotiating with small kirana wallas etc), negligible growth (10 - 15%). AT best it could give you market returns since growth cannot exceed this range), high PE (no scope for expansion as too much is factored into the price).
Is it all because of the product range, huge brands, MNC pedigree, stable business- something that would be alive even after 10 years.Surely markets could not be wrong for so long. I am not a HLL fan but still this stock perplexes me. What could HLL do right to double in 3 years. I do not know? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Replies:
Posted By: The Lord
Date Posted: 23/Jul/2006 at 11:20pm
| but why does hll have any problems with the big fish of retail business as they do keep hll product on their shelves and with such a fan following of diffrent hll brand dont you think it will be ill advice for the big retailers not to sell their products |
Posted By: basant
Date Posted: 23/Jul/2006 at 11:25pm
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They would sell their products but the point is that all these while HLL was selling to several small kirana stores which had no bargaining power if you read the papers reliance retail has already put in its application for a 40% gross margin - the normal trend was to give in 15% although nothing will chnage in the next one year but if we have a 5 year view there would be a big shift in bargaining power. ALl over the world the biggest company is neither UniLever nor P&G but Wal Mart and Carrefor.The retailers will have to sell HLL products but this arm twisting game may become messy towards all these larger FMCG companies dis-advantage.
What do you do otherwise? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 28/Jul/2006 at 2:30am
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One of the basic facets of investing is to recognize growth. If two companies with equal management skills are available at similar PE’s then it would make sense to buy the one which has a clearer growth path set for itself. In HLL and ITC’s case the answers are not that easy to find. I have tried to initiate a discussion as to why ITC has always been cheaper to HLL on value terms. Is the market missing something or are the investors overlooking?
Excise duty at Rs 6438 crores constitutes almost 40% to ITC’s total revenues of 16,224 crores. This means that the newer businesses that the tobacco leader is getting into will start making a significant impact to the bottom-line sooner then one could expect These businesses have started gaining traction and the company has diversified into foods, hotels, paper etc.The biggest kicker in growth for ITC might come in Fy 09 when its retail venture choupal sagar starts throwing back cash. By that time the non tobacco business might contribute to about 50% of the net revenues of the company. The salient features of the choupal sagar project are: Largest web based initiative for Information
Existing scale
Rajasthan
Information dissemination
Target: 1 e-choupal for every 5 villages "The idea was to first increase the size of the rural wallet, then garner a larger share of it, Basic innovation in our business model is being able to do that in a commercially viable manner" S. Sivakumar, CEO, ITC International Business Division Therefore even ITC appears to be on a far stronger wicket then HLL but if we look at the PE ratios of the two companies HLL lags behind. Then why is the market is willing to give HLL a much higher PE compared to ITC? This is so because HLL’s RoE is at 64% compares extremely favorably to ITC’s 26.5%. RoE is one of the important indicators of how efficiently a company is using its capital. More over that ITC's past history of quite a large number of project failures does not impress the market either. These failures did not close down the company because the tobacco division was throwing up cash which was used to wash away the sins from other diversifications. Some misses from ITC over the decade have been: · Paper business · Finance · Aquaculture · Excise related problems More importantly then the real fear in ITC is its business model. Yes, while cigarettes are one of the best known businesses to be in smoking is also injurious to health. Each year the Govt. has screwed the nuts and bolts out for the tobacco industry, railway stations, public parks, movie halls, smoking is being banned everywhere and excise duty increased.. In the Sooner or later and it is certain the Indian legal system will have to change and once that happens ITC will also be one of the sufferers. This is also a major reason for a low PEG compared to HLL. While we can be sure that the Govt, will never ban things like having a bath and brushing the teeth and drinking tea on the breakfast table with bread and kissan jam we could not be that sure about whether the govt. would not go ahead a few steps more to ban smoking. I am not suggesting that smoking will be banned but just that this subjective fear makes ITC available at a cheaper value to HLL. As they say there are no free lunches in the world. Large cap stocks rarely have pricing anomalies and what ever is available is sold for a reason. So while I favor ITC there is nothing to suggest that it is mis-priced. The stock carries a risk premium which might not work out to your disadvantage before you sell it out. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: maag
Date Posted: 29/Jul/2006 at 9:32pm
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This is interesting does this mean that investors should buy both of HLL and ITC or as you say you like ITC more that will be your choice. The ending seems a bit confusing as to what should an investor buy ITC or HLL? |
Posted By: basant
Date Posted: 29/Jul/2006 at 10:59pm
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Maag
I hold neither one of them. the ides was to explain the disparity in pricing. But given a choice I would hold ITC rather then HLL because even though the PE gap may remain you would actually be able to make money in ITC because of robust earning growth.
Therefore even with a PE gap of 10 (HLL's 33 to ITC's 23) the stock prices could move at the respective growth rates for each company inspite of ITC carrying the inherrent risk that I have mentioned above.
In any case one should not play ITC for an upward revision in the PE multiple. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: prashantmohta
Date Posted: 29/Jul/2006 at 11:00pm
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wonderful comparison between the two giants.but there is no point blaming the market,anyhow it is an eye opener for those who invest in fmcg stocks.
prashant,
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Posted By: tggyp
Date Posted: 22/Feb/2007 at 4:06pm
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Dear TEDies
A Citigroup report on HLL today
http://www.indiaearnings.com/sub_india/compnews.php?autono=268306 - http://www.indiaearnings.com/sub_india/compnews.php?autono=268306
From the last posts under this topic when ITC was at 160 levels and HLL at 240 levels we have come a long way since.
With an attractive dividend yield in HLL of nearly 3% isnt it a good defensive strategy to place abt 15% of ones portfolio in this steady compounder. The stock has hit 189 levels today.
Comments invited to this post .. Thanks
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Posted By: basant
Date Posted: 22/Feb/2007 at 5:19pm
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Are you sure that the company would grow EPS by more then 15% - sooner rtather then later the PE's will start to correct a bit since they are presently indicating higher growth rates.Those 25+ PE's seem a bit costly for a company that is growing at less then that. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tggyp
Date Posted: 22/Feb/2007 at 5:33pm
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That i agree sir, but the dividend yield in this stock which is a market leader in many categories it operates makes me have a look at it.
There are issues related to pricing power but with a portfolio that it has and international parentage it should be able to overcome the margin threat from retailers.
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Posted By: basant
Date Posted: 22/Feb/2007 at 5:43pm
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Yes dividend yield should protect downside and more importantly this company seems to have fallen off everybody's radar - maybe that could help! Personally I am not bullish on HLL though.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 22/Feb/2007 at 10:31pm
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I agree and feel that the time to buy HLL will come not now but later because right now the PE is too high given the growth rate.Considering the consumtion boom ,demand should be high but uncertainty about competitive pressures and input prices affecting growth rates and profitablity makes it difficult to be optimistic about the share price right now.Nestle may be a better bet. ------------- Ajith |
Posted By: Mohan
Date Posted: 22/Feb/2007 at 12:34pm
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ITS has the tendency to diworsify from time to time wheres HLL is a very tightly run operation. high ROE is one of the factors that buffet looks for.
However margin of safety is the point to be debated here. ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: xbox
Date Posted: 22/Feb/2007 at 4:56am
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In my personal opinion ITC is never buy candidate. There are many reasons for that ... 1. It's cash cow cigarette biz is prone to public/govt litigations. Almost all US cigarette companies are paying huge money after losing their cases. Honestly also cigarette is unhealthy business.
2. Management is pathetic. In era of demerger, they merged their hotel company into it. Market don't like conglomerate status. Such a vast diversification makes ITC a poor candidate for strategic buyers.
3. Paper business has not made wealth anywhere in the world. It is such a complex business with no pricing power. They are investing their cash in such poor sectors.
4. Planned foray into FMCG also looks pathetic. Market is quite saturated and cost of raw material is ever increasing. Also it will take long time for them to get pricing power. HLL, P&G are such old players but still they don't have enough pricing power. How can we assume ITC will get it. Also with organized retail coming to India in big way, chances for pricing power looks slimmer.
5. Management is such a pig. They have never made killing in any businesses except cigarette but this was child given to them from BAT. Hotels are again a very difficult business which functions like commodity.
6. Their garment retail foray was done at right time but see where are they now. They are not aggressive here as well.
ITC could be left for Mugerilals.  ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: tigershark
Date Posted: 09/Mar/2007 at 7:31pm
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at amkt cap of 56400 crs itc is available at roughly2.5timesits 08 sales.considering a eps of 10 for 08 the stock is available at 15 times forward earnings.being a diversified co the pe will tend to be lower compared to other cos growing at 22 %pa.still if one looks at the steps taken by the mngmt the pedigree of the mngmtwith a 3-5 yr investment horizon for steady if not phenomenal appreciation can itc be considerd as a good investment at the current price of 140-150.TEDS pl discuss ...one can visit http://www.itcportal.com - www.itcportal.com for all co details.iam not very good with posts so i have given the web site for details ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: tigershark
Date Posted: 10/Mar/2007 at 11:25am
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what do teddys feel bout ITC at 15 times o8 earnings is this stock bcoming undervalued and is too much being seen into the more than 4% vat it may have to pay on cigarettes.the stock may not be a blockbuster but it could be asteady compounder over the next 5 yrs. ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: basant
Date Posted: 11/Mar/2007 at 12:18pm
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I think after the present tax structure is revised ITC should become a good buy again.15 times PE (as you say) is to my mind the lowest for ITC over the past few years. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: us121
Date Posted: 11/Mar/2007 at 9:03pm
i am holding ITC since long.
My conviction is based on:
1. management with vision
2. cigarette: cash cow business and not likely to be going down any more
3. great growing business of hotels and rural retailing using scalable model
4. leveraging the experience of channel management in FMCG
5. reasonable PE
i am very much optimistic on this stock and am ready if need to hold for longer. ------------- ABILITY will get u at d top. CHARACTER will retain u at d top |
Posted By: Ajith
Date Posted: 11/Mar/2007 at 8:47am
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Market perception of HLL can change to positive suddenly and so it may be a good contra buy. ------------- Ajith |
Posted By: tigershark
Date Posted: 11/Mar/2007 at 8:59am
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i would agree with all 3 both as defensives with a 3-5 yr holding do make sense at the current levels the mkt is worried that states may start charging obscene amounts of vat for cigarrettes hence until that is sorted out itc could remain under pressure ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: kulman
Date Posted: 14/Mar/2007 at 4:07pm
Following the launch of its snacks brand 'Bingo' in 16 different flavours, ITC's Food Division today said it will invest Rs 150 crore in the next two years for its foray into the snacks segment and is eyeing 25% market share of the Rs 2,000 crore organised market in the next 4-5 years.
"We have already invested Rs 60-70 crore for our foray into the snacks segment. In a couple of years we will be investing Rs 150 crore for the foray," Ravi Naware, chief executive, ITC Foods Division, said here. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 14/Mar/2007 at 6:42pm
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Please do not go overboard with all trhis. Rs 150 crores is 0.3% of ITC's market cap so except for some emotional/sentiment support these things are meaningless!
Even if you take Rs 500 crores (25% of Rs 2000 crores) it comes to 1% of the market cap!
These things are good for the business channel "exclusives" or "breaking" news only. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 14/Mar/2007 at 7:01pm
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Sure, I know it is peanuts literally. Just wanted to post this newsflash.
Ab jab shaam ko log Mallya ki shaaraab piyenge, saath mein Wills cigarette hogi aur snacks (chakna--Bambaiyya word) ITC ka khayenge!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Mohan
Date Posted: 14/Mar/2007 at 7:29pm
chakna- Kulmanji, I have not heard this word for soo long. Aap ne to yaaden taaza kar di  ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: us121
Date Posted: 16/Mar/2007 at 9:52am
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Report on Sharekhan on ITC:
ITC VAT on cigarettes Key points
------------- ABILITY will get u at d top. CHARACTER will retain u at d top |
Posted By: Vivek Sukhani
Date Posted: 16/Mar/2007 at 10:27am
| Good piece us121. But this FMCG space is a little tough space to track. They are big big brands, but are also facing competition from one another. Its all a call on who's going to the Star-War..... ITC has a multi-faceted approach, is into hotels, retail, e-choupal and paper besides cigarattes but then both have big money spinners. |
Posted By: tigershark
Date Posted: 16/Mar/2007 at 10:33am
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bengal has introduced vat at 12.5% expect cigarette prices to go up by 10 -12% question is will smokers stop smoking at the least they may go for a more affordable brand.liquor is also out of the purveu of vat and taxes are state controlled but of late liqour sales have been booming impact of vat on the short term may be negative. ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: basant
Date Posted: 16/Mar/2007 at 10:46am
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our earnings per share (EPS) estimate for FY2008 would change by 9% from Rs8.8 to Rs8, which is still a 9.6% growth over the FY2007 EPS. At the current market price of Rs142, the stock is quoting at 17.7x its FY2008E EPS and 10.7x FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a revised price target of Rs200.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 17/Mar/2007 at 1:14pm
| basant, I beleive we must treat these games little bit differently. They are big big brands. They enjoy Investors' faith( Investors', mind you, not traders). I see no reason why we should assign thenm lower multiples compared to the Tech companies. They dont depend upon boom in US economy. They are mostly debt free, have excellent track record, yield quite decently.Also, you can never fear doing an averaging in them. So, Growth will be nothing but a feather in their cap but then dont some caps look better with or without feathers?????? |
Posted By: basant
Date Posted: 17/Mar/2007 at 1:34pm
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Personally I am more of an ITC fan then a HLL. But if companies start growing at 12% - 15% then surely if not this year then the next those PE's would come down. Even if the PE does not come down returns would be limited to the growth rates only 12%-15%.
I think that ITC could have seen the worst but just because so many research houses are bullish makes me cautious on this one. Over the past 4 years there have been numerous investment houses backing HLL because of the increase in rural India spend and what not. All this whilke while HLL's profits have growth the huge PE overhang of the late 90's have capped the return.
The index has quadrapled but HLL remains where it was. While ITC will not go the HLL way since it has a formidable entry barrier and huge market share with superb pricing power the days of making 20%+ CAGR seems to be under a cloud!
Now if someone wanted to buy a fast growing lean and fit FMCG why not look at Marico? Smaller niche companies always grow faster then the bigger elephants.
Co-inciodentally a friend of mine who is a stauch RD fan has been holding VST Industries for over 4 years always arguing about how cheap this company was with respect to ITC but while ITC has beaten the market. VST has stayed almost where it was.
He still argues for VST though. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: deveshkayal
Date Posted: 18/Nov/2007 at 10:34pm
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YC Deveshwar on the cover story of Outlook Business and Business Today. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: monu_duggad
Date Posted: 15/Feb/2008 at 6:11pm
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well...gone r the days of HUL trading at premium to ITC..........
today both are available at similar p/e's...
HUL : 205 ...eps of 9.6 for CY09...p/e....~21.3
ITC : 202..eps of 9.8 for FY09...p/e.....20.6.................
HUL has come a long way since the days of 33-35 p/e...
still old investors refuse to sell HUL (holding since 10,15 years.....just like they dont want to sell infosys or reliance)
..basantji wud be in better position to throw light on the kind of cult status which hul used to enjoy ------------- If you think you can,You Can |
Posted By: nitin_jagtap
Date Posted: 15/Feb/2008 at 6:19pm
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If I may add .....I can remember only from the early nineties period when SM Dutta did a complete rejig of HLL ....HUL was perceived as a dowry gift a father would give his daughter...so much so that some even took loans to buy this blue chip( now its fading blue though). Industry people tell me that HLL's arrogance cost it a lot. For that matter even during the year 2000 Indiainfoline through 5 paisa.com (and when nirmal jain was writing columns for Business India ) had recommended this a stock for retirement. ------------- Warm REgards Nitin Jagtap |
Posted By: kulman
Date Posted: 21/Mar/2008 at 7:58pm
http://businesstoday.digitaltoday.in/#">
Biz Today latest issue covers HUL & its new chief Nitin Paranjpe. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Ajith
Date Posted: 21/Mar/2008 at 9:08pm
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Right now neither HUL and ITC should be looked at by aggressive investors though there may be safety and appreciation in both. ------------- Ajith |
Posted By: Vivek Sukhani
Date Posted: 25/Mar/2008 at 9:57am
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It was a matter of great delight to see HUL to be the only company among comprising the sensex group to have made a 52-week high yesterday.
Is it the return of the Old Stalwart??
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Posted By: tridev
Date Posted: 26/Mar/2008 at 12:00pm
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ya this is mainly because people are shifting their money to fmcg temp rly.
for lever to outperform would be difficut in long term.
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Posted By: basant
Date Posted: 26/Mar/2008 at 12:22pm
Lever is suffering from Jaundice for the past 5 years. Tiger shark any comments as a Doctor ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 26/Mar/2008 at 12:38pm
And there are many companies which have already died in this mess-up in last three months.....
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Posted By: basant
Date Posted: 26/Mar/2008 at 12:48pm
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Markets are not about 3 months. In that period of time stocks will move wildly but as investors we need to look at returns over a longer period of time. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: gopal
Date Posted: 26/Mar/2008 at 12:49pm
Basant ji,
I think in 2000 got split and were trading then for about Rs. 200/- plus .
So from there till Rs238 in 2008
I think Tiger bhai will tell that patient is still not fully well but recovering ..... but amazingly patient is strong but refuses to recover
But Basant ji why have all FMCG stocks in India over a long period of time not performed well ......
The demand for soaps, shampoo, talcs, oils, etc has only risen but share prices have not responded accordingly ...
------------- Women are like the stock market Coz they're irrational n can bankrupt u if u're not careful |
Posted By: Vivek Sukhani
Date Posted: 26/Mar/2008 at 12:58pm
tab to lever ka ipo se lekar ke aaj ka price se compare karna padega.
By the way, whats the point in making 100 bags and losing 90 bags in no time......
In a nutshell, discussion about prices carries us nowhere.......
Those who invest in Lever, ITC and other FMCG, pharma companies dont expect them to be multibaggers. they dont intend to lose 50p.c of the bags they dont want to lose, and go for stable plays.
Dont you think its quite unjustified to go on bashing FMCG companies inspite of the fact they have shown thei strength in such a period when most of the stocks have lost 50 p.c.
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Posted By: basant
Date Posted: 26/Mar/2008 at 1:02pm
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People do not use more shampoos or eat more biscuits as they get up the income line. These companies are getting new competition (ITC) so while the market will grow slowly these companies are past their prime. If you see in the 80's Colgate was the darling of the markets but it changed as soon as markets realised that the opportunity is not that big as much as it sounds. Look at the sales of these Foreign companies and you would know what I am referring to.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tridev
Date Posted: 26/Mar/2008 at 1:10pm
| lever sales is 14000(o7).while all india is using soaps and shampoos since long time but sales figures are not enough. |
Posted By: Vivek Sukhani
Date Posted: 26/Mar/2008 at 1:11pm
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Entirely agree, yet people will use FMCG products under all circumstances. these are not high fliers but are stable plays. No one is saying one should only buy FMCG stocks. Its all about risk management. In a portfolio of 5 stocks, its better to have a stock each from major sector rather than having three good companies of a single sector. I think those who get into Levers, ITC, Asians of the world do recognise this opportunity cost but want to keep their risk low. I think this strategy is perfectly acceptable. Just as someone wants high risk-high return, someone prefers low-risk low return. Its placed midway between bonds and stocks. |
Posted By: smartcat
Date Posted: 26/Mar/2008 at 1:24pm
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Innovative constantly evolving FMCG companies like Marico, ITC and Pidilite give the best of both worlds - growth and stable returns. HLL is a dull boy in comparison with these companies. |
Posted By: Vivek Sukhani
Date Posted: 26/Mar/2008 at 1:35pm
Everytime people speak something good about Pidilite, I get a sense of pleasure. However, every company has that phase of explosive growth and Pidilite is going through that phase.
Lever under SM Dutta was a very very aggressive company. They used to acquire listed companies at a scorching pace. Ponds, Lipton, Brooke Bond were acquired during that period.
ITC is a different league altogether. They are sitting on such robust cash flows, that makes it anytime a buy.
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Posted By: basant
Date Posted: 26/Mar/2008 at 1:54pm
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Did it have anything with SM Datta or the time in which he was operating. MS Banga and his power brands did almost nothing yet Banga was promoted.
This one still grows at 15% but its high PE (justified because of high RoCE) does not let investors make money.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 26/Mar/2008 at 2:46pm
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High RoCE with Lever has a catch involved. somehow, I think with a lever, while calculating RoCE, we shall be adding the negative working capital to the capital employed and then look at the picture. I think by capital employed, we mean the funds which a company is making use of. In that sense, why shall we ignore the suppliers' funds which the companies makes use of.This company sits on a huge negative working capital, distributes almost all its earnings and keeps its equity low. Over and above this, they go for a buyback at such a hefty premium to its book value.
MNCs have a very typical HR structure. they operate more like a PSU where the ministry signs MoU with companies. So long as the MD meets the targets, its okay for the parent.
Lever suffered for its overagression into non-core areas. the only reason it managed to cope is the quality of its cash flows.
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Posted By: monu_duggad
Date Posted: 26/Mar/2008 at 3:10pm
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Lever is laggard/underperformer becos it lost its aggression 2-3 yrs back.... with its size,distribution muscle and brand equity...it shud have taken processed foods to next level which ITC is doing.......
at the same time....its margins deteriorating fast...raw material prices going up...competition is intensifying big time...so p/e de rating was a matter of time...it used to trade at 35 times once upon a time....but all this factors took its toll...P&G attacked hul by slashing detergent prices by 50% in 2004.......
as for return ratios all fmcg companies have good roce and roe...colgate and godrej have better roe and roce than hll..still godrej is avlbl at 16 times forward p/e
~ my 2 cents..... ------------- If you think you can,You Can |
Posted By: tigershark
Date Posted: 26/Mar/2008 at 3:14pm
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one fmcg stock thats got battered out of shape from 250-120 is atfl-agro tech foods, this is an old rj/rd fav. co is trying to restructure and has introduced 2 new products in the mkt,if and that if is imp conagra does get serious about this co then a mcap of 250 crs may look cheap in the future.most of their revenues at the presnt are from edible oils a low margin business and enough competition from marico, ksoils and others.conagra foods has a huge portfolio of products, how many will they launch, and how many will sucseed i dont know.but they appear to be taking baby steps.there is a separte thread for atfl so this one can be shifted there. biggest problem for all fmcg cos in the last 3 months is that input costs have gone thru the roof ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: amaani
Date Posted: 10/Sep/2008 at 2:40pm
| What are the prospects of ITC . Is the worth having in one's portfolio? |
Posted By: paragdesai
Date Posted: 08/Oct/2008 at 8:22am
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Hi Vivek,
Are we missing something in ITC?
This stock has not participated in Bull Market & going down in bear market. Nothing has changed other than Dr. Ramdos angar against smoking. His tough laws against smoking making this stock nervous??????
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Posted By: Vivek Sukhani
Date Posted: 08/Oct/2008 at 10:46am
Hi Sir,
I dont think anything has changed majorly for ITC. Its a typical FMCG stock, which will never jump up in a hurry. Now as to why it has fallen, I believe a lot has to do with sentiment. If it has fallen from 240 to 160, its a fall of just 33.33 p.c. In the context of the overall market behaviour, most people holding ITC must be feeling a lot better off than investors( read, mungeris) who were seeking nirvana in the Great Stocks which did so well in the Bull ( read the Great Foolish) Market of End 2007.
ITC has a consitency, and I am of the opinion, that its never a sell under any circumstances, for passive shareholders. What may have happened is for aggressive type of an investor, who may have got ITC at lower levels, may have wished to swap it off with stocks which have got so mercilessly hammered.
Yesterday, I was contemplating booking something from castrol and making it go into some of my other favorites, where I felt like averaging/pyramiding. But decided against it, as somehow I see higher dividends from Castrol, more than what street is expecting. So, investors who my type, who are extremely focussed on the funds, may have exited ITC for other aggressive bets.
ITC may see gradual churn, in case markets continue to slide.
If you are asking for my opinion, I could say I have a buy Call for ITC at L1 at 157 and L2 at 138, which I released to my friends. there has been no change to that.
------------- Jai Guru!!! |
Posted By: prashantmohta
Date Posted: 08/Oct/2008 at 10:50am
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whether govt. ban smoking or do anything this is my old favourite stock.
it will do better in course of time.
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Posted By: basant
Date Posted: 08/Oct/2008 at 11:39am
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A casual index fund investor will not regret investing in the index over a 5 year period. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 17/Jan/2009 at 9:08am
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Basant Sir, A point on ITC. I agree that ITC has got into spheres which are into late development/maturity. However, this company displays the tendency of ADAG group when it comes to marketing. take for instance, soaps......I am surprised to see Vivel Di wills' presence. And this is when, vivel's target is a bit high-end, though not like that of Essenza Di Wills, but then it was Superia which was supposed to take on the lower end. But the way, Vivel is making inroads make me feel better about ITC in the long-run. Also, with Biscuits, all i think ITC needs to do is to forge tie-ups with good non-Britannia biscuit companies like a Bisk farm or some international company.
Hotels, in my opinion, is no way near maturity. There's a very big scope there. And ITC's financial might might just help it especially when it comes to penetrating unexplored but popular regions.
Agri will be a star business in coming years.
However, if cigaratte is what one is going for, a godfrey is a better bet than ITC. if conglomerate is what one is going, very few companies will fit the bill better than ITC. ------------- Jai Guru!!! |
Posted By: nav_1996
Date Posted: 18/Jan/2009 at 2:04pm
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I think best days for ITC may be behind them.
FMCG - All markets they are entering are pretty mature with well entrenched players. Hotels - You may want ot buy Indian Hotels Paperboards - I have not understood why they are in this business Retail & Lifestyle - Not sure how much they can grow profitably. Tobacco - This is only business one should buy them for. This is gain very mature and and may be declining business. This accounts for almost 80% profits still |
Posted By: Hitesh Shah
Date Posted: 18/Jan/2009 at 8:39pm
There's also their agriculture-related activity (e-choupal?). ------------- |
Posted By: basant
Date Posted: 18/Jan/2009 at 9:05pm
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Agri grows at 3%; Hotels are tough businesses to cerate wealth see the stock price of Indian Hotels for the past 10 years.Paper and retail are tough businesses to operate.
SOmetimes ITC would do well to stick to its core competency and distribute that cash rather then squandering it off into multiple businesses.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 18/Jan/2009 at 9:30pm
Although I shouldnt be saying this, yet I would just say, dont underestimate this company........
Sometimes what looks like a side business develops into a big money spinner.
By the way, ITC uses a good amount of paper for captive purpose.
Lifestyle division is more for exhibition than anything else. They dont use their lifestyle stores as if there is a fair there.
However, i do agree some of their moves appear quite puzzling. Like that of agarbattis and incense sticks. By the way, can someone throw any light whether ITC and Wimco pact has already happened or is still underway? ------------- Jai Guru!!! |
Posted By: kannanravi1
Date Posted: 30/Apr/2009 at 9:12pm
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http://economictimes.indiatimes.com/News/News-By-Industry/Cons-Products/Food/Perform-or-perish-for-ITC-Foods/articleshow/4437520.cms?curpg=2 - http://economictimes.indiatimes.com/News/News-By-Industry/Cons-Products/Food/Perform-or-perish-for-ITC-Foods/articleshow/4437520.cms?curpg=2 This should be good news I think. ITC is finally entering phase 2 in my opinion - profitability. Phase 1 was all about building market shares and brand recall and in my humble opinion phase 1 was taking too long for comfort. They have sizable market shares in foods. Both snacks and biscuits are doing reasonably good from a market share standpoint. Now is the time to start focusing on profitability. ------------- kannan |
Posted By: kannanravi1
Date Posted: 30/Apr/2009 at 9:14pm
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http://www.telegraphindia.com/1090427/jsp/business/story_10881336.jsp - http://www.telegraphindia.com/1090427/jsp/business/story_10881336.jsp Not sure what they are trying to achieve through these passive investments? Shouldn't they better be using all this cash either for green field expansions on the WelcomeGroup portfolio or they should make outright acquisitions ------------- kannan |
Posted By: Vivek Sukhani
Date Posted: 14/Jan/2010 at 7:14am
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Dont be in a particular rush to sell ITC.
I achieved my previous high slightly earlier but I have promised to myself not to reach the level where I reached in the last crash( although I outperformed there, yet I wasnt able to time it to perfection).
See, you need stocks like ITC from falling again back to those levels, during the crash. Cash is a great call, but the reason i outperformed quite well in the crash was not because I moved into cash, but because i moved into castrol, which did excellently well when stocks around it were busy in digging lower and lower.
The fact of the matter is, cheaper stocks( low P/E, I mean) perform horribly during bad times. And it is there you realise why they were cheap at the first place. Pawns are excellent for launching an onslaught, but in defence they get cut like carrots.
So, its a wonderful feat to have reached the previous peak before the market has reached there, but the task isnt complete yet. There's a bigger and more difficult task ahead...of doing well during bad times, which though not in sight, but will not warn us before arriving. ------------- Jai Guru!!! |
Posted By: PKB2000
Date Posted: 14/Jan/2010 at 11:50am
Yes that was my thought also few months back but later I thought if I wish to buy hotel then there are stocks in hotels and if I wish to buy agri business then there are brighter and well performed stocks like Zuari, and Rallies or some other so far disappointing stocks in agri type business like KSOIL or GODREJ IND!
And we do not know what is the part valuation of ITC. ------------- I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso |
Posted By: Vivek Sukhani
Date Posted: 15/Jan/2010 at 12:04pm
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Well, ITC is cheaper than most hotel stocks, especially the most popular ones.
ITC is not like Zuari...ITC is an agri-marketer. It doesnt produce fertilisers. It procures foodgrains and agri comodities from farmers and processes it and markets the same. ------------- Jai Guru!!! |
Posted By: PKB2000
Date Posted: 15/Jan/2010 at 12:10pm
------------- I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso |
Posted By: Vivek Sukhani
Date Posted: 15/Jan/2010 at 12:25pm
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It is trying to pervade every layer of the chain.
Its ability to lose is its biggest strength. And that allows it to brandish its aggressiveness and arrogance.
It may not look cheap, but if you consider the strengths of this monolith, then the high multiple wont appear unreasonable. Its a price-maker in its main business. And price-makers command a decent multiple. ------------- Jai Guru!!! |
Posted By: hit2710
Date Posted: 15/Jan/2010 at 12:50pm
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Regarding ITC, I would tend to agree with Vivek, because it has combination of businesses and most of them have huge potential.
Soaps & Detergents Snacks etc Hotels Paper Retail--Wills Lifestyle which from personal experience I can say that makes the finest shirts and other clothes including clothes for women as well. This business can grow much bigger. AgriProducts--Here also potential is huge. Plus the basic cigarettes which will keep chugging along generating free cash. This is one company which has diversified and not deworseified. ------------- Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart. |
Posted By: Ashutosh
Date Posted: 15/Jan/2010 at 6:07pm
Hi Vivek,
What I have seen is generally a retailer after setting up chains goes for agri-marketing and as they have control over retailing space and its there next logical extension to improve their revenues.
How will ITC being FMCG company will grow in agri-marketing ? ------------- My tastes are simple: I am easily satisfied with the best |
Posted By: Vivek Sukhani
Date Posted: 23/May/2010 at 1:40pm
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No body, not even a die-hard ITC fan, would have expected this kind of a bonanza from ITC this year. A dividend of 10 rupees a share( including the special dividend of 5.5 rupees a share) along with pretty wonderful set of results and a bonus, was more than what the investors were hoping for. With this, the battle between between ITC and HUL can be definitely settled in favour of ITC. On one hand we have a company which is setting a higher and still higher bar of operating performance, and on the other hand, we have a company which is struggling to even post moderate growth. The gap between ITC and HUL should definitely widen now in favour of ITC. ------------- Jai Guru!!! |
Posted By: nav_1996
Date Posted: 23/May/2010 at 8:58pm
| Agree. ITC has all engines firing. Desppite slower cigratte volume growth they managed to grow topline by 27%. |
Posted By: new2investing
Date Posted: 24/May/2010 at 2:41pm
And the continuously improving performance of its FMCG biz might prove to be the icing on the cake. Appears to break even sooner than later. ------------- Learner... |
Posted By: nav_1996
Date Posted: 25/May/2010 at 7:10pm
| Looks like HUL is also getting its act together. PAT up 11% (excluding exceptional item) and sales up 8%. It is good long term investment for conservative portfolio. |
Posted By: Vivek Sukhani
Date Posted: 18/Jun/2010 at 9:40pm
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ITC declares a 1:1 bonus.
I dont know what ITC is upto????
   Not even a die-hard ITC fan would have expected these kind of rewards....I wont be surprised if Mr. Deveshwar would be accorded red-carpet welcome at the AGM this year.
The gap will only widen between ITC and HUL now..... ------------- Jai Guru!!! |
Posted By: vinvestor2010
Date Posted: 29/Jun/2010 at 7:07am
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New article on http://business.in.com/article/boardroom/the-itc-kings-gambit/14562/1 - ITC in Forbes India.
however it makes some valid points even though slightly critical.
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Posted By: monu_duggad
Date Posted: 17/Aug/2010 at 3:02pm
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Seems like there is no fan of fmcg (my sector)......while the sector has given good returns ;-)
------------- If you think you can,You Can |
Posted By: Ravenrage
Date Posted: 28/Jul/2011 at 1:23pm
| ITC - All the way ! |
Posted By: shontou
Date Posted: 13/Sep/2011 at 9:55am
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ITC::Takeaways Motilal Oswal Annual Global Investor Conferences
Key Takeaways Cigarettes: Volume growth strong; margin expansion to be gradual Cigarette volume growth remains strong, although the low base effect will not be a big factor in the coming quarters as it was in 1QFY12. Post the recent increase in VAT in Tamil Nadu (from 12.5% to 20%), ITC's average VAT rate is ~16.5%. Recent price increases will enable the company to absorb the impact of the excise hike. ITC operates at 55%+ EBIT margin in cigarettes, the highest in the industry. Incremental margin expansion over the next 2-3 years will be a function of improved product mix and will be moderate. FMCG: Improving profitability in biscuits; new launches driving growth FMCG losses declined 15% in 1QFY12 and continue to trend lower; the key driver for this decline has been the foods division, which has now broken even for the last six quarters. The two major new launches of FY11, Sunfeast Yippee noodles and Vivel Activ Fair skin cream, have performed well. Yippee in particular has performed well above expectations, with demand outstripping current capacity. In personal care, the volume share of soaps has exceeded 6%; ITC is targeting double-digit market share in soaps in 2-3 years. In shampoos, Fiama Di Wills Anti Hair Fall has been well accepted. Hotels: Gradual recovery; to invest INR15b over three years In hotels, the company expects low to mid single-digit occupancy growth; ARR growth will play out after the next few quarters, as room additions in the industry are likely to slow down. Over the next three years, ITC plans to invest INR15b in the hotels business. It will commission its 600-room Chennai property by 4QFY12. Agri and Paper Agri division sales are likely to grow in high single digits, as leaf tobacco prices are stable. Demand for Indian leaf tobacco is unlikely to increase due to higher production in Brazil and Africa. ITC's new 0.1m ton paperboard unit will aid growth in FY13; FY12 growth will be driven by mix improvement and higher realizations. Valuation and view The company plans to invest INR15b across businesses in FY12. ITC continues to be our top pick in our FMCG coverage universe due to strong pricing power and higher growth potential in the cigarettes business, declining losses in FMCG, and likely uptick in the hotels business. ------------- Every day, self-proclaimed stock market "experts" tell us why the market just went up or down, as if they really knew. So where were they yesterday? |