Buy, sell or hold? How to trade ITC post Q1 earnings

ITC saw a sharp slump in trade on Thursday. The company's April-June quarter net profit rose 18 percent year-on-year to Rs 1,891 crore, in-line with street expectations.

Net sales, however, rose lower-than-expected 10 percent year-on-year to Rs 7,339 crore.

So, is it time to buy the stock once again?

CLSA
Increases target to Rs 400 from Rs 370
Raise earnings per estimates by 1-1.5 percent over FY14-16
Preferred pick in the consumer sector given the strong positioning in Indian cigarette markets which provides strong pricing power yielding better earnings visibility. This is particularly relevant at a time when there are slowdown concerns in the Indian consumer industry.

Bank of America Merill Lynch
Buy with a target price of Rs 370
Upside risk; Valuations Reasonable Vs Peers; retain BUY
While estimates are unchanged post Q1, see upside risk from 64mm. It retains buy.
ITC trades at 30x one-year forward PE for 19 percent estimated EPSCAGR.
Valuations are attractive given 1) lesser earnings risk, 2) continued pricing power in cigarettes and 3) sharp discount vs other FMCG peers.

JP Morgan 
Overweight
Hikes target to Rs 390 from Rs 360
Should remain a core long-term holding
Steady Cigarette EBIT Growth, improving profitability of other FMCG business, high FCF generation and the potential for a higher dividend payout.
Aggressive price hikes this fiscal year will overshadow volume weakness and support high-teens earnings growth, in our view.

Deutsche Bank
Maintains Buy
Target Price at Rs 385

Citi
Maintains Buy
Ups target price to Rs 405  from Rs 370

Credit Suisse
Maintains outperform
Ups target to Rs 385 from Rs 360

Jefferies
Maintains Buy
Ups target price to Rs 413 from Rs 381

nasrin.sultana@network18online.com