More re-rating ahead for ITC; cigarette volume growth revives in Q1

Profitability of most other businesses is expected to improve further and stock valuations are still cheap

Shares of ITC, which were under pressure until recently due to regulatory challenges faced by its flagship business of cigarettes, hit a 52-week high of Rs 307 during intra-day trade on Friday, before ending 5.2 per cent higher at Rs 302.2, after the company announced its June-2018 quarter (Q1) results late on Thursday. In a surprise, the company reported 1.5 per cent growth in cigarette volumes as against 1-2 per cent decline expected by analysts. There was 1 per cent growth in the year-ago quarter. 

In fact, this was the third consecutive quarter of a progress in cigarette volume growth (see