Buy ITC; target of Rs 280: Firstcall Research

Firstcall Research is bullish on ITC and has recommended buy rating on the stock with a target of Rs 280 in its July 5, 2012 research report.

“ITC is one of India's foremost private sector companies with a market capitalization of over US $ 33 billion and a turnover of US $ 7 billion. ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by Business World and among India's Most Valuable Companies by Business. ITC ranks among India's `10 Most Valuable (Company) Brands'. ITC also ranks among Asia's 50 best performing companies. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery. ITC is widely perceived to be dedicatedly nation-oriented. ITC believes that its aspiration to create enduring value for the nation provides the motive force to sustain growing shareholder value.”

“ITC practices this philosophy by not only driving each of its businesses towards international competitiveness but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating. ITC's R&D Centre the first independent R&D centre in India to get ISO 9001 accreditation and certified with ISO 14001 for Environment Management Systems by DNV. The R&D Centre is also certified for the standard ISO/IEC17025:2005, by National Accreditation Board for Testing and Calibration Laboratories (NABL). This certification is awarded for "General requirement for the competence of Testing & Calibration Laboratories”.”

“ITC has reported net profit of Rs 16143.60 million for the quarter ended on March 31, 2012 as against Rs 12814.80 million in the same quarter last year, an increase of 25.98%. It has reported net sales of Rs 69546.40 million for the quarter ended on March 31, 2012 as against Rs 59599.90 million in the same quarter last year, a rise of 16.69%. Total income grew by 18.15% to Rs 71625.10 million from Rs 60621.50 million in the same quarter last year. During the quarter, it reported earnings of Rs 2.06 a share.”

“At the current market price of Rs 248, the stock is trading at 26.98 x FY13E and 24.19 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.19 and Rs. 10.25 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 17% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 17.41 x for FY13E and 15.71 x for FY14E. Price to Book Value of the stock is expected to be at 7.48 x and 5.71 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 280 for medium to long term investment,” says Firstcall Research report.    

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