This is my personal view and it may sound pessimistic.
Disclaimer - I too hold a large portion of ITC in my portfolio and still adding on.
FMCG
The only thing that come in to my concern is that the consumer shift back towards organic products in FMCG.
I see many organic pop up stores doing good sales with high margin.
Lots of ayurvedic medicinal stores doing a good sales with high margin where people flock around.
Also as a consumer, I see parents opting healthy options for kids like fresh juices rather than Noodles and biscuits.
On positive note ITC is expanding its FMCG business globally and that would bring the profits.
CIGARETTE
Coming to Cigarette a data shows the Gen Z smoking rates are generally lower compared to older generations.
It's a heavily government regulated industry and the government may cut the cash cow of ITC any time.
Also the WHO has asked the governments world wide to increase the sin tax by 50% minimum.
Apart from this the smuggled & duplicate Cigarettes are major caveat for ITC.
PAPERBOARDS, PAPER & PACKAGING BUSINESS
Paper packing business is heavily derived from cutting down trees and as we see and due to climatic changes the raw materials may become expensive and scarce, cutting down the margins.
Also the new startups which bring decomposable packing materials may gain traction and lots of R&D is happening in this segment which may disrupt the whole packing industry soon due to climatic change.
Also this is a heavy power consuming industry and even though ITC has its own green power to support its packing business, power would be costing high to very high in coming days due to EV Revolution.
HOTEL
Regarding Hotel, its a luxury class hotel which would be occupied due to K-Shape recovery in India.
The caveat here is it has high capital and operating costs.
INFOTECH
Infotech - already we see a slowdown in IT due to recession and AI.
It's self explainable so I didn’t deep dive in to it.
AGRI
Here we see future growth as American Investor “Jim Rogers” said future is for hard assets and agri.
But the caveat here is even though ITC exports many products like Chilli, Turmeric, Cumin, Coriander, Pepper, Fenugreek, Fennel, Mustard, etc.
Its major export is raw leaf tobacco.
Conclusion
I really sometimes feel is ITC overhyped because, I don’t know a single investor who does not hold ITC in their portfolio and everyone talks about it in Investing field.
Even though am optimistic about ITC there are the pessimistic caveats that run back of my mind often.
No offence - just shared my thoughts.
If wrong, my apologies and please correct me where am wrong.
Tell me why ROCE of ITC goes down if they are doing great 😂ITC is just a retirement resort don't encourage zombie companies in equity investing, there are world class companies in india need equity for expansion. FMCG companies like HUL, PG, MONDELEZ they are dead. Nobody wants a shampoo from listed players
Thank you Bro.
That was an awesome analysis bro,
This is my personal view and it may sound pessimistic.
Disclaimer - I too hold a large portion of ITC in my portfolio and still adding on.
FMCG
The only thing that come in to my concern is that the consumer shift back towards organic products in FMCG.
I see many organic pop up stores doing good sales with high margin.
Lots of ayurvedic medicinal stores doing a good sales with high margin where people flock around.
Also as a consumer, I see parents opting healthy options for kids like fresh juices rather than Noodles and biscuits.
On positive note ITC is expanding its FMCG business globally and that would bring the profits.
CIGARETTE
Coming to Cigarette a data shows the Gen Z smoking rates are generally lower compared to older generations.
It's a heavily government regulated industry and the government may cut the cash cow of ITC any time.
Also the WHO has asked the governments world wide to increase the sin tax by 50% minimum.
Apart from this the smuggled & duplicate Cigarettes are major caveat for ITC.
PAPERBOARDS, PAPER & PACKAGING BUSINESS
Paper packing business is heavily derived from cutting down trees and as we see and due to climatic changes the raw materials may become expensive and scarce, cutting down the margins.
Also the new startups which bring decomposable packing materials may gain traction and lots of R&D is happening in this segment which may disrupt the whole packing industry soon due to climatic change.
Also this is a heavy power consuming industry and even though ITC has its own green power to support its packing business, power would be costing high to very high in coming days due to EV Revolution.
HOTEL
Regarding Hotel, its a luxury class hotel which would be occupied due to K-Shape recovery in India.
The caveat here is it has high capital and operating costs.
INFOTECH
Infotech - already we see a slowdown in IT due to recession and AI.
It's self explainable so I didn’t deep dive in to it.
AGRI
Here we see future growth as American Investor “Jim Rogers” said future is for hard assets and agri.
But the caveat here is even though ITC exports many products like Chilli, Turmeric, Cumin, Coriander, Pepper, Fenugreek, Fennel, Mustard, etc.
Its major export is raw leaf tobacco.
Conclusion
I really sometimes feel is ITC overhyped because, I don’t know a single investor who does not hold ITC in their portfolio and everyone talks about it in Investing field.
Even though am optimistic about ITC there are the pessimistic caveats that run back of my mind often.
No offence - just shared my thoughts.
If wrong, my apologies and please correct me where am wrong.
—
Thanks & Regard,
Kathir Azhagan.
Bahut badiya, Keep it Up...😊
Tell me why ROCE of ITC goes down if they are doing great 😂ITC is just a retirement resort don't encourage zombie companies in equity investing, there are world class companies in india need equity for expansion. FMCG companies like HUL, PG, MONDELEZ they are dead. Nobody wants a shampoo from listed players