Feb 14, 2017 06:03 PM IST | Source: Moneycontrol.com

Buy ITC; target of Rs 295: Axis Direct

Axis Direct is bullish on ITC has recommended buy rating on the stock with a target price of Rs 295 in its research report dated February 07, 2017.

Buy ITC; target of Rs 295: Axis Direct

Axis Direct's research report on ITC

After five consecutive years of double-digit excise increase (CAGR of 18% over FY12-17), the excise increase on cigarettes for FY18 was a reasonable 6%. The uncertainty on the GST rate and modality still lingers but the finance minister has mentioned in various forums that GST implementation is not a tax increase exercise and is largely going to be revenue neutral and in sync with current rates.

Outlook

With 7% price hike, we expect 2.5% volume growth and 15% cigarette EBIT and EPS growth in FY18. Mid-teens EPS growth after two years of single-digit EPS growth (EPS CAGR of 4% over FY15-17) coupled with second consecutive year of volume growth keeps us positive despite ~40% stock price appreciation since the last budget. Maintain BUY with revised TP of Rs 295 based on forward P/E of 26x (vs. Rs 280 earlier).

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