Accumulate ITC; target of Rs 534: KR Choksey

KR Choksey's research report on ITC

ITC reported strong topline performance amidst a challenging operating environment. For Q2FY25, the revenue increased 16.7% YoY (+12.3% QoQ) to INR 207,359 Mn, outperformed our estimate. EBITDA increased by 4.8% YoY (+0.2% QoQ) to INR 67,618 Mn, largely in line with our estimate. Adj. Net profit increased by 2.0% YoY (-2.0% QoQ) to INR 49,940 Mn, missed our estimate, mainly due to higher-than-expected depreciation and lower other income. We lower our FY25E/26 EPS estimate by 4.6%/ 2.6%, respectively, due to lower-than-expected Q2FY25 EPS estimate, subdued demand, and inflationary pressure.

Outlook

Using the SOTP approach, we maintained our multiples (cigarette business at 15.5x EV/EBITDA, Hotels at 17.3x, Paper business at 4.1x, Agri business at 4.5x, and FMCG at 9.2x EV/Revenue) and arrive at a target price of INR 534/share (previously: INR 545), offering an upside of 10.7% from current levels. Accordingly, we maintain our rating of “ACCUMULATE” on ITC Ltd. shares.