IIFL has recommended a buy rating on ITC, with 12-month price target of Rs 222, in its report dated July 2, 2009.

"The resilience of ITC’s cigarette business’s profitability came to the fore in FY09, despite a tough tax environment. Details in the year’s annual report point to a 17% increase in net realisations on cigarettes, despite a 3% drop in cigarette volume sales. Capex was lower in hotels in FY09 and we expect it to pick up in the current fiscal. Working capital has been expanding over the last four years. Lower capex, coupled with higher non-cash items, led to doubling of FCF in FY09. Cash and equivalents went up to Rs 12.4 billion (from Rs 7.2 billion in FY08). Return ratios were depressed this year on account of new capacities, where utilisation levels were low, adversely affecting asset turns. Buy with 12-month price target of Rs 222," says IIFL's report.

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