Stock Review: ITC

ITC is India's largest cigarette company with a market share of 70% and 85% value share. Although taxes have risen steeply in the past, ITC has been able to grow its cigarette business, given that it enjoys pricing power due to a higher market share. It has diversified into FMCG, hotels, retailing, paper and agriculture. The stock trades at FY11 estimated P/E of 26.5, which is below the industry average. Strong understanding of the businesses, cost-saving raw material sourcing model, extensive distribution network and strong balance sheet make ITC a good buy.