HDFC Securities' research report on ITC
ITC’s 1QFY21 beat revenue expectations as the company clocked 17% YoY decline vs the estimated decline of 28% YoY. Cigarette (adjusted for excise duty on inventory) net revenue/EBIT declined by 35/39% YoY with a volume dip of 35% YoY. The company saw sequential improvement in cigarette revenue with marginal sales in April, 30-35% YoY decline in May and a strong recovery in June. However, the last 10 days have been challenging due to the return of lockdowns. FMCG showed strong momentum as the company saw a comparable growth of 12% YoY, with 34% YoY growth in staples, convenience foods and health & hygiene (75% of the portfolio). The growth was led by packaged foods (biscuits, atta, and noodles) and hygiene products. We expect the FMCG momentum to sustain, at a slightly lower growth rate.
We maintain our EPS estimate for FY21/FY22/FY23 as we expect a recovery in the company 2HFY21 onwards. We value ITC on SoTP and arrive at a target price of Rs 236 (implied P/E of 18x P/E Jun-22E EPS). Maintain BUY.
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