WHY ITC IS FALLING (Research Done a year ago)
1)
Revenue contribution from Cigerratte segment as % of Total Revenue
Reduced
2016
63%
2017
62%
2018
52%
2019
46%
Q320
41%
EBIT
contribution as % of Total revenue from Cigerratte segment as % of Total
revenue remained same
2016
85%
2017
86%
2018
86%
2019
86%
Q320
85%
Every
1rs capex made in ITC how much is put into Cigerratte?
2016
13%
2017
10%
2018
4 %
2019
6 %
So
effectively Segment whose contribution to overall EBIT margin has been
maintained around 85% its contribution to Top line has been decreasing swiftly
with almost negligible further capex put into.
Also
reiterating the fact that legitimate cigarette industry has been on
declining since 2010-11 steadily by compound rate of over 4% p.a. due to
1)
Taxation : Excise duty rose by 130% while vat rose by 150% and GST by 20%
2)85%
of packaging is covered by warning images
Due to
which illegal market share which has marginal taxation and packaging
restriction has been on rise and which accounts for 90% of total tobacco
consumption in India.
Now
if money is not going into Cigerrate segment than where it is flowing?
Every 1rs capex made in ITC how much is put into FMCG other
& Hotel?
2016
60%
2017
61%
2018
57%
2019
81%
How
much does they both contribute to overall EBIT margin
2016
1%
2017
1%
2018
2%
2019
3%
So
effectively 81% of rs 1 is invested in them but contributing just 3% of overall
margin.
Hence
we seen ITC share price under heavy pressure
Reduced by almost 40% in a years time.
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