India is now one of the few pure play combustible cigarette markets in the world following recent government notification that bans the sale of ENDS products.
In addition, there is a sharp fall in duality of tobacco consumption, implying lower elasticity.
Windfall gains from corporate tax allow ITC to delay price hikes as it seeks to regain market share from the illicit cigarette segment as well as other forms of tobacco consumed in India.
It also allows pricing flexibility within its portfolio that straddles multiple price points, driving market share gains ahead of expectations.
ITC has among the highest EPS gains on paper due to the tax cut, which isn’t reflected in the stock thus far.
There is an overhang of incremental negative news on GST / cess / excise, more so after the tax cuts announcement, but the stock price, already seems to price in the worst case scenario.
Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.
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