ITC hits record high post acquisition of select brands Johnson & Johnson brands

In past three trading sessions, ITC surged 7% compared with 1.6% rise in the benchmark CNX Nifty.

ITC is trading higher by nearly 1% at Rs 394, extending its an over 5% rally in past two days on NSE, after the company has acquired the trademarks for 'Savlon' and 'Shower To Shower' in India from Johnson & Johnson for an undisclosed amount.

The stock opened at Rs 386 and touched a record high of Rs 402 on NSE.  The trading volumes on the counter almost doubled with a combined 7.37 million shares changed hands till 1250 hours on NSE and BSE.

In past three trading sessions, the shares of fast moving consumer goods (FMCG) company surged 6.5% from Rs 370 on February 12, compared with 1.6% rise in the benchmark CNX Nifty.

“The company has entered into Asset Purchase Agreements with Johnson & Johnson Ltd., India & Johnson & Johnson Pte. Ltd., Singapore on February 12, 2015 for purchase of ‘Savlon’ and ‘Shower To Shower’ trademarks and other intellectual property, respectively, primarily for use in India,” ITC said in a statement.

Analyst at Antique Stock Broking initiates coverage on the stock with a Buy rating and target price of Rs 450 per share.

“Although Savlon and Shower To Shower are currently very small and limited due to lack of the parent company’s focus on personal care, the potential to ramp-up the brands by leveraging the company’s network cannot be ignored. These two brands have effectively opened up a market of Rs 4,600 crore in size for ITC,” analyst said in a report dated February 16.

It is too early to comment on the earnings potential of these two brands. However, it will add a new brand positioning of hygiene care and enable the company to launch several brand extensions in the fast growing categories of liquid soaps and body wash, added report.