Buy ITC; target of Rs 330: Axis Direct
Axis Direct is bullish on ITC has recommended buy rating on the stock with a target price of Rs 330 in its research report dated August 02, 2017.
Axis Direct's research report on ITC
Gross sales, EBITDA, and adj. PAT grew 4%, 6%, and 7%. Cigarette gross sales and EBIT grew 7% and 9% with 2% volume growth (vs. street estimate of flat to -2%). Other FMCG and hotel sales grew 9% and 6%, while agri and paper sales growth at -1% and 3% disappointed. Non-tobacco EBIT grew 4.5% YoY. Cigarette EBIT growth in Q2 will be watched keenly because of tax increase in July.
Over FY17-19, we expect sales/ EPS CAGR of 10%/ 11%. Valuation at FY19E P/E of 28x is not cheap but remains significantly cheap on a relative basis. For long term investors, we see ITC delivering 10-12% EPS CAGR with marginal volume growth in cigarettes but healthy profit growth in non-tobacco with improvement in the economy. Maintain BUY with TP of Rs 330 based on forward P/E of 30x.
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