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Wassup with ITC?

Tale of the Tape 

Hiya everyone. Markets were back in the green! 📈

Nifty and Sensex jumped +0.7% each to hit a new all-time high AGAIN! Midcaps (+1%) and Smallcaps (+0.7%) also moved in sync. The advance-decline ratio was in favour of the bulls (3:2). 💪

Most sectors ended in the green. IT (+2%), Auto (+1.6%), and Metals (+1.%) witnessed strong buying. Banks (-0.2%) and NBFCs (-0.1%) saw minor cuts. ✂️

After an explosive 2022-23, is ITC’s market run over? Read our top story below. 🧐

This small-cap home textile stock could deliver over 72% returns in the next year. More details below. 🚀

Aerospace and Defense-related stocks were up after the GOI allowed 100% foreign direct investment. MTAR Tech, Data Patterns India and Apollo Micro Systems rallied between 5%-9%. 🔥

Graphite India (+9%) was the top gainer on the NSE 500 after Jefferies said it sees a further 19% upside from current levels. 💰

Eureka Forbes fell 4% after its promoter said they would sell a 12% stake through multiple block deals. 👀

Grasim Industries was in focus after its paints biz foray kicked off with the launch of three new plants. 🎨

Olectra Greentech (+2%) won a Rs 4,000 cr order for electric buses from Mumbai’s civic body. ⚡

Sugar stocks were volatile AF after the GOI hiked the FRP (fair and remunerative price) on sugarcane by 8%. 🎢

IPO update. GPT Healthcare was subscribed 28% on Day 1 of bidding. 👍

Here are the closing prints:

Nifty 22,217 +0.7%
Sensex 73,158 +0.7%
Bank Nifty 46,919 -0.2%

Where’d The ITC Bulls Go?

Confused Looking For GIF by Looney Tunes - Find & Share on GIPHY

What’s wrong with ITC? After more than doubling between 2022 and 2023, the stock is down 10% over the last 6 months. Potential multibagger or boring compounder from here on out? Here’s what will decide its future. 🔮

Let’s start with cigarettes, the company’s core cash cow. In Q3FY23, volumes DECLINED 1%-2%. Some of this is because of a high base. ICYMI – after falling 20% between FY13-FY20, ITC’s ciggy sales shot up due to steady taxation policies + winning back market share from illicit competition. But, there’s only so much it can grow before it hits a ceiling. Also, the usual inventory stocking that happens before a Union Budget didn’t happen this time, which sucks. 👎

Then there’s the stake sale overhang. ITC’s biggest shareholder is the British American Tobacco (BAT) company. For the unaware, all you need to know is BAT’s relationship with ITC has been complicated. It tried to take over the firm long ago but was stopped. It also wants ITC to focus only on cigarettes (doesn’t care too much for FMCG or hotels). BAT has long been grumbling about selling its ITC stake, but it’s starting to take concrete steps now. Until this is over, the stock may remain under pressure. 📉

Finally, there’s FMCG. It’s been going okay-ish but has obviously been hurt by the broader rural slowdown & tough competition from regional players. FYI – reports say ITC is looking to acquire a 47% stake in Prataap Snacks. Yes, ITC has Bingo chips but they haven’t been able to penetrate the heartland the way Prataap has. This might just be what ITC needs to fight its way out of the rural slump. 😋

TL;DR: There’s nothing fundamentally wrong with ITC. There’s just a lot of question marks over its potential positive triggers. Experts say long-term investors just need to wait it out. FYI – Nuvama has a target price of Rs 535 p/sh; +31% from current levels. 💸

Stocktwits Specials

The Nifty PSU Bank index is up 24% in 1.5 months. But what are the key reasons for this rally? Also, which PSU Banking stocks should you buy right now? 👀

Check out our recent video as we cover all the major updates, its future outlook and 4 trade setups on PSU Banks by SEBI RAs! 🚀

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Investment Opportunity

Indo Count Industries has been on a red, hot streak! The stock has more than DOUBLED over the last year, easily beating the Nifty Smallcap 100 index’s gains. So, what’s going on here, and how much more juice is left in this stock? 🚀

About the company: Founded in 1988, Indo Count is one of India’s largest makers of bed linens, towels and upholstery interiors. FYI – they are one of the biggest firms by volumes in part due to the 42% bump in bed linen capacity that it added in FY23. 📊

What’s popping? The broader industry is on the cusp of a potential boom. Volumes have recovered from COVID-19 lows. Fun fact: Indo Count hit its HIGHEST-EVER quarterly revenue in Q2FY23. Analysts estimate cotton product imports to rise in the US and EU in 2024, as retail inventory went through a sharp correction after the pandemic. Overall, this would be HUGE for the company’s export potential. 💯

FYI – Indo Count has invested heavily to make the most of this opportunity! They’ve spent over Rs 1,000 cr in the last two years to boost capacity to 153 mn MTRPA (+50%). This is enough to accommodate a 2x jump in its top line in the medium term. 🤑

Big Picture: The global home textile market size was valued at $125 billion in 2023 and is expected to grow at a CAGR of 6.0% from 2024 to 2030. While this may seem on the lower side, this is very much a ‘market leader takes all’ situation, which is what Indo Count is hoping for. 🥇

TL;DR: The company has been killing it after Covid. With the US market looking at a potential rebound in 2024, Indo Count‘s aggressive expansion drive gives it an edge over its peers. FYI – brokerage Sunidhi Institutional Research sees a WHOPPING 72% potential upside over the next year. 🔥

Stocktwits Spotlight

Check out this amazing techno-funda analysis of Antony Waste Handling by Siddhant Mittal. Follow them for more amazing stock analysis and add $AWHCL.NSE to your watchlist to track its performance. Here’s the link:

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Disclaimer: Siddhant Mittal is not a SEBI registered advisor and you should not construe any information discussed herein to constitute investment advice. Consult your financial advisor prior to making any actual investment or trading decisions.