Accumulate ITC; target of Rs 486: Deven Choksey

Deven Choksey's research report on ITC

ITC reported a revenue of INR 203,764 Mn., up 9.8% YoY (+0.1% QoQ), was in-line with our estimates (+0.3%). EBITDA stood at to INR 65,194 Mn., up 3.4% YoY (+2.5% QoQ), in line with our estimates (+0.3%). EBITDA margins declined by 225bps YoY (+88bps QoQ) to 34.7%. Net profit (excl. Discontinued operations) up by 2.8% YoY (+7.3% QoQ) to INR 50,748 Mn, largely in line with our estimates (-0.3%). We revise our FY26E/27E EPS estimates by +1.5%/+3.8%, driven by an encouraging long-term outlook for ITC, underpinned by sustained cigarette market share gains, expanding FMCG footprint, and commencement of high-margin nicotine derivative exports. The company’s premiumisation strategy, robust digital distribution (including eB2B scale-up), and expanding rural reach further support this momentum.

Outlook

We value ITC using SOTP valuation, with Cigarette business at 14.0x FY27E EV/EBITDA, Agri. Business at 6.0x FY27E EV/EBITDA, Paper business at 6.0x FY27E EV/EBITDA, FMCG at 6.5x FY27E EV/Revenue, and ITC Hotels at INR 11.0 per share, implying a target price of INR 486. We downgrade our rating from “BUY” to “ACCUMULATE” on the stock.

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