2 hrs ago
Elitecon International Hits Upper Circuit Amid Market Crash
Elitecon International is a small tobacco company whose shares rose to the daily trading limit.
This happened even though the wider Indian stock market fell.
The company’s shares have risen for five trading sessions in a row.
One reason investors are optimistic is that ITC has raised prices for some cigarettes.
If Elitecon keeps its products cheaper, some customers might choose them instead.
The company could also raise some prices while remaining more affordable than competitors.
However, the company’s exact advantage over ITC’s products has not been independently confirmed.
The stock is still much lower than it was several months and a year ago.
Elitecon International shares rose 5% to ₹9.59 on Thursday, extending gains for a fifth straight session.
The stock rallied despite Sensex and Nifty opening sharply lower after the US 10-year Treasury yield exceeded 5.10%.
The company linked the rally to cigarette price increases by ITC, including higher prices for several cigarette brands.
Investors see a potential opportunity for Elitecon to attract price-sensitive consumers or improve product realisations.
Despite a 23.32% weekly gain, Elitecon remains down 37.16% in one month and 90.66% year to date.
- Who
- Elitecon International and investors in its shares; ITC is cited as the company raising cigarette prices.
- What
- Elitecon International shares hit a 5% upper circuit and rose to an intraday high of ₹9.59.
- Where
- In Indian stock-market trading; Elitecon has a cigarette manufacturing facility in Nashik.
- When
- Thursday, 24 September, after the stock had already gained for four consecutive sessions.
- Why
- Investors reacted to the possibility that ITC’s cigarette price increases could give Elitecon a stronger value proposition.
Bullish case
Cautious case
Impact of ITC price increases
Bullish case
Higher prices for ITC cigarettes could give Elitecon more room to attract price-sensitive consumers with competitively priced products.
Cautious case
The extent of overlap between Elitecon’s products and the affected ITC brands, along with Elitecon’s actual retail-price advantage, still needs independent verification.
Pricing strategy
Bullish case
Elitecon could maintain relatively stable prices to increase volumes or selectively raise prices to improve realisations while preserving affordability.
Cautious case
The company’s potential opportunity depends on whether it can retain a meaningful advantage after taxes and other costs.
Share-price outlook
Bullish case
The stock has gained 23.32% in a week and has risen substantially over two and five years.
Cautious case
The stock remains down 37.16% in one month, 81.58% in six months, 90.66% year to date, and 95.55% over one year.
Key facts
- Intraday high
- ₹9.59 per share
- Previous close
- ₹9.14 per share
- Weekly performance
- Up 23.32%
- One-month performance
- Down 37.16%
- Year-to-date performance
- Down 90.66%
- ITC price change
- Gold Flake Premium reportedly rose from ₹125 to ₹135 for a 10-cigarette pack.
- Manufacturing base
- Elitecon International has a cigarette manufacturing facility in Nashik.
Quotes
Elitecon International press release
Company press release discussing the potential impact of ITC’s cigarette price increases
“A higher retail pricing benchmark could give an alternative manufacturer greater scope to compete for customers, improve product positioning and build a more profitable domestic business. The opportunity is not simply to follow prices higher. It is to turn a changing competitive landscape into incremental sales and stronger unit economics.”
livemint.com
“For the bull case, however, the commercial logic is compelling: a higher competing price benchmark could give Elitecon more room to win customers, optimise pricing and expand its domestic business.”
livemint.com
Sources
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