Buy ITC; target of Rs 254: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on ITC

ITC’s FMCG business continues its upward trajectory with 11% comparable sales growth and 9.2% EBIDTA margins. Cigarette volume continue to disappoint with 5% decline. Hotel business also turned EBITDA positive in Dec’20 though we do not expect it to impact overall EBITDA significantly. We believe strong sales momentum in Foods, Hygiene and growth across the discretionary portfolio will aid in overall recovery. We believe ITC would be one of the key beneficiary of an uptick in consumer demand given the depth and width of its portfolio, fast paced launches and innovations. We believe sustained double digit EBIDTA margins in FMCG business by FY22/23 and relative stable cigarette tax regime can re-rate the stock. ITC trades at 17.3x FY23 EPS, ~45% discount to our coverage universe with 4% dividend yield and 4.4% PBT CAGR over FY20-23.

Outlook

Maintain BUY with SOTP based target price of Rs254 (valuing cigarette business at 15xFY23 EPS, 59% of value).

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