ITC - Buy on declines

An established cigarette major, 60% of ITC's revenues are contributed by other businesses such as FMCG, hotels, paper, stationery and agriculture. Nevertheless, ITC relies heavily on the cigarette business as it generates 80% of net profit. Consistent growth, strong cash flows and high dividend payout of more than 45% make the company a safe haven for investors in these uncertain times.

Time Span	Price	Change	%Change
Today	196.85	-5.50	-2.71
Week	198.85	3.50	1.76
Month	200.80	1.55	0.77
Three Months	189.10	13.25	7.00
Six Months	156.15	46.20	29.58
One Year	163.15	39.20	24.02

Our recommendation -

ITC is a defensive stock and will give a decent return over a long term. Investors should utilize any sharp correction to buy this stock and hold for a period of 18-24 months for a good return on investment. Buy around 180 levels on a weak day !

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ITC - Buy

ITC is the market leader in the Indian tobacco space, as its foray into FMCG, particularly foods and cigarettes. The company has been able to build strong positions in completely new businesses such as soaps, packaged staples and snacks over the past few years. This adds another strong leg to the medium-term growth prospects for ITC.

Dominant player in tobacco space: ITC is by far the biggest player in cigarette market with a strong -- 70 per cent market share is more than 5x the size of its nearest competitors.

ITC Ltd., a well-established player in the food space in India with presence across segments such as packaged staples, finger snacks, biscuits and packaged foods.

ITC has significantly invested in expending its food business portfolio and the related supply chain which helped the company to create strong backbone. The company is expected to deliver strong earnings growth in medium term considering packaged and processed food as the next growth driver.

Agri business -- Benefits from continued mix change: The company's conscious decision to focus on higher profitability products and move away from lower-margin products like sesame, rice, pulses, etc., in FY09 resulted in EBIT (earnings before income and tax) margins increasing to 11 per cent in FY09 (vs. 5.2 per cent in FY08).

Leaf tobacco is at present 50 per cent of category sales -- with soya, coffee and wheat accounting for the rest. The company expects to sustain margins, though volumes/revenue growth might decline on account of lower leaf tobacco output due to unseasonal rains.

Time Span	Price	Change	%Change
Today	206.50	0.75	0.36
Week	203.40	2.35	1.15
Month	186.55	19.20	10.29
Three Months	190.10	15.65	8.23
Six Months	168.95	36.80	21.78
One Year	145.73	60.02	41.18

In spite of high valuations, ITC seems a good long term pick. The retuns table given below shows the scrip performance which has gained 45% during the last one year. Buy around 175 levels for a target price of 250 holding period 6-7 months.

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Buy ITC below 200

Company: ITC
Broking House: UBS
Rating: Buy Price Target: Rs 300

Prima facie, the union bud-get is negative for cigerette maker ITC because of the hike in duties, says UBS in a post budget note on the company. The increase in excise duties is higher than expectations, the note says. However, other measures announced in the budget — including tax incentives for the hotel industry, will be positive for the firm. This will push up ITC’s bottomline for FY11 as the company is also completing a large hotel during the year. UBS has kept its buy rating on the company, but to account for the worsening margin picture on the cigerette front, it has cut down the price target from Rs 325 earlier.

Readers are recommended to consult their financial advisers before making any investment. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

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Buy ITC

Although tobacco remains the major revenue earner of the company, yet over the years the company has made remarkable progress in the non-tobacco businesses by leveraging the ITC brand. Its strong presence in agro commodities, FMCG products, rural marketing, luxury hotels, organised retail, paper and packaging make it a company with very stable and secure fundamentals. Over the years, it has built a very strong foundation in trading and export of agro commodities. Moreover, its rural marketing initiative -- e-choupal -- will give them exceptional access to agricultural produce.

“On the back of its diversified nature and leadership position in various business segments, it validates premium valuation. Hence ITC is one of the safest players to bet for medium-to-long term,” informs Kapur.

Source : ET.com

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Free float on NSE

Free-Float Methodology Mean?

A method by which the market capitalization of an index’s underlying companies is calculated. Free-float methodology market capitalization is calculated by taking the equity’s price and multiplying it by the number of shares readily available in the market. Instead of using all of the shares outstanding like the full-market capitalization method, the free-float method excludes locked-in shares such as those held by promoters and governments.

Calculated as:

FFM=Share Price x (No. of Shares Outstanding – Locked In Shares)

Free-Float Methodology means:

The free-float method is seen as a better way of calculating market capitalization because it provides a more accurate reflection of market movements. When using a free-float methodology, the resulting market capitalization is smaller than what would result from a full-market capitalization method.

Free-float methodology has been adopted by most of the world’s major indexes, including the Dow Jones Industrial Average and the S&P 500.

Conversely, once the Nifty shifts to free-float methodology, weights of companies like Reliance, ICICI Bank, L&T, HDFC, ITC and HDFC Bank would increase considerably, while weights that of companies with high promoter stake such as Wipro, DLF, ONGC and NTPC would fall drastically.