FMCG pack: UBS bets on ITC, sell UB & Tata Global Beverage

UBS Securities is betting big on ITC  as it is likely to post a strong second quarter results. Sunita Sachdev, Executive Director, UBS Securities is expecting its volume to growth at 1-2% in this quarter. She also reasons that ban on chewing tobacco will support cigarette volumes.

Steady volume growth, high returns and robust cashflow will support ITC, she adds

Meanwhile, Sachdeva recommends selling Tata Global Beverages . According to her, valuations of United Breweries  ' is stretched and therefore it is downgraded to sell.

Also read: How you should play ITC, TCS, Exide now

Transcript of the full interview to follow soon.

Q: What do you think ITC might turn in today?

A: ITC is our top pick. We expect good results from the company today. We expect topline growth of 17.5 percent led by operating profit growth of around 18 percent. The  bottomline growth will be in the same area. Importantly, volume growth in the cigarette segment is expected to be between 1-2 percent.

Q: Would you still recommend a buy on ITC even after the kind of valuation levels which is making some people slightly uncomfortable?

A: It has run up very significantly, but it is our top pick. We have one year price target of Rs 340. It is our top pick because of three fundamental reasons. We expect the company to continue to move consumers up from regular filters to king size filters. New consumers are coming into the micro filter level. Many states have banned chewing tobacco; though it is not exactly a direct product that the consumers should move to, but over the long-term, consumers who chew tobacco will have to move to cigarettes. ITC will gain from all these fundamental moves and it continues to remain our top pick.