 "This KK Modi Group stock has zoomed 121% thus far in calendar year 2024")
Godfrey Phillips, ITC, tobacco stocks in focus: Shares of Godfrey Phillips India, a flagship company of KK Modi Group, hit a record high of Rs 4,785.5 as they surged 17.8 per cent on the BSE in Monday's intraday amid heavy volumes. The stock of one of the leading fast moving consumer goods (FMCG) companies in India surpassed its previous high of Rs 4,486.40, touched on June 26, 2024.
Thus far in calendar year 2024, the share price of Godfrey Phillips India has zoomed 121 per cent as compared to nearly 12 per cent rise in the BSE Sensex.
At 11:42 AM, the stock was quoting 14.6 per cent higher at Rs 4,655 as against 0.26 per cent gain in the benchmark index. The average trading volume on the counter jumped multiple-fold with a combined 1.27 million shares, representing 9 per cent free-float equity of Godfrey Philips, having changed hands on the NSE and BSE.
The company is engaged in the manufacturing of cigarettes and tobacco products and trading of cigarettes, tobacco products, and other retail products.
Godfrey Phillips' portfolio comprises established cigarette brands such as Four Square, Red & White, Stellar, and Cavenders; the company also manufactures and distributes the Marlboro brand of cigarettes, which enjoys strong customer loyalty. The strong distribution network helps promote other products such as chewing products and confectionery.
Godfrey Phillips had delivered robust cigarette domestic volume growth in the previous financial year 2023-24 (FY24). The company’s topline was supported by an increase in export of unmanufactured tobacco in FY24 at Rs 1,205 crore, registering a growth of 56 per cent over FY23.
The company had recorded consolidated gross sales value of Rs 11,271 crore and net profit of Rs 884 crore, representing an increase of 20 per cent and 28 per cent, respectively, compared to last year. Going forward, the management said the company plans to enter some new markets with some new offerings while the company shall continue to focus on productivity and profitability.
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As part of the company's endeavour to maintain focus on its core business, the board of Godfrey Phillips, in its meeting held in April-24, had decided to exit from carrying out the business operations of its retail business division (24Seven) and the exit will be subject to completion of the necessary formalities.
24Seven is India's organised retail chain in the 'round the clock' convenience store format with more than 145 stores/kiosks spread across Delhi NCR, Punjab and Telangana'.
Meanwhile, ITC in its FY24 annual report had said the FMCG-Cigarettes segment witnessed consolidation on a high base after a period of sustained growth momentum. Market standing was reinforced through focused portfolio/market interventions and agile execution. Differentiated variants and premium segments performed well.
Shares of ITC were trading 1 per cent higher at Rs 463.95, rising 9 per cent thus far in the month of July, ahead of Budget 2024. The stock is trading at its highest level since January 2024. It had hit a record high of Rs 499.60 on July 24, 2023.
According to Motilal Oswal Financial Services, ITC's core businesses of cigarette and FMCG are seeing steady growth. Key monitorables are overall demand recovery, rural recovery and government’s initiatives to drive consumptions. FMCG continues to enjoy industry leading growth over peers due to ITC’s category presence (large unorganized mix, under-penetrated, etc.). Consistent margin improvement further provides confidence in growth without compromising profitability.
After the demerger of its asset-heavy hotels business, ITC's return profile will also improve. Margin improvements in the other FMCG business will further enhance return ratios and valuation multiples, the brokerage firm said in a stock update. It reiterates BUY rating with SOTP-based target price of Rs 500 (implied 27x FY26E EPS).