HDFC Securities is bullish on ITC has recommended buy rating on the stock with a target price of Rs 358 in its research report dated January 09, 2018.
HDFC Securities' research report on ITC
With fiscal stress on the rise, many investors are worried on the likelihood of govt. increasing taxes on cigarettes in the upcoming Union Budget. We think this fear is exaggerated. Cigarette taxes contribute only ~2% of total tax collection: Cigarette industry contributed ~Rs 284bn to the exchequer in FY17 (ITC contribution ~75%). The total tax collection (direct and indirect) for India was at Rs 17,032bn in FY17 out of which Rs 8,562bn was from indirect taxes. Therefore, cigarette industry contributed ~3% to the indirect taxes and ~2% to the total taxes, not very significant. In addition, the dependence on tax revenues from cigarettes has declined over the years to 1.7% in FY17
OutlookWe expect Revenue/EBITDA/APAT CAGR of 9/10/10% respectively over FY17-20E. We have a BUY rating with a TP of Rs 358, based on 32x Dec-19EPS.
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