Buy ITC; target of Rs 575: Motilal Oswal

Motilal Oswal's research report on ITC

ITC delivered a consolidated revenue growth of 8% YoY (in line) in 1QFY25. Gross cigarette revenue grew 6% YoY led by volume growth of ~3% YoY (in line), mix improvement, and price hikes. The premium cigarette segment continued to outperform; while the value segment sustained weakness. FMCG segments delivered 6% revenue growth, adversely impacted by the severe heat waves and slow packaged food growth. The margins were slightly hurt by rising competitive pressure (from local and regional players), increased commodity prices, and weak demand. EBIT margin stood at 8.7%. (est. 9.0%) in 1QFY25.

Outlook

With a stable tax on cigarettes, we anticipate sustainable growth in the business. We value the cigarette business at 20x Jun’26 EV/EBITDA (earlier 17x EV/EBITDA). We reiterate our BUY rating with an SOTP-based TP of INR575 (implied 30x Jun’26E EPS).