Change in consumer habits due to the ongoing lockdown is seen hitting volume growth of ITC Ltd and United Spirits Ltd, brokerage house Edelweiss Securities said in a report. It sees annual volume growth of ITC and United Spirits dipping 7% and 3%, respectively.
The brokerage house, while maintaining its 'negative' view on the "sin" sector, said it was difficult to quantify the impact as of now. It also did not make any changes to the companyies' earnings-per-share estimates for 2020-21 (Apr-Mar).
Edelweiss Securities also found that around 80% smokers had cut down on smoking due to unavailability of cigarettes, unwillingness to smoke at home in the presence of family, and increased focus on personal health. Around 54% of smokers indicated that they would not get back to smoking once the lockdown is lifted. However, of the respondents who continue to smoke, more than three-fourths have not downgraded or moved to another brand, indicating brand stickiness, which is seen as a positive for ITC. The survey also showed that alcohol consumption was dependent on social interactions and a bounceback is expected once the lockdown ends. Only 10% of alcohol consumers plan to cut down on consumption. Pickup in demand for alcohol is seen only once pubs and restaurants resume operations, which is unlikely for about four-six months after the lifting of the lockdown. Edelweiss Securities said the unavailability of "sin" goods due to the lockdown had led to a change in habits, which is a bigger downside risk for ITC than United Spirits. At 1404 IST, shares of ITC and United Spirits were 1.6% higher each at 161 rupees and 501 rupees, respectively, on the National Stock Exchange.