Sharekhan's research report on ITC
ITC’s cigarette sales volumes declined by 10-11% in Q4FY2020 affected by lockdown (cigarette business revenues slumped 6.5%); sales volumes stood almost flat in January-February. Non-cigarette FMCG business revenue declined marginally by ~3%; business growth in January-February stood at 5-6%. Business revenue grew by ~5% on a comparable basis (excluding hived-off retail business) and EBIDTA margin improved by 160 bps. Cigarette business is operating at a 100% capacity utilisation; non-cigarette FMCG categories such as biscuits, Atta, Noodles, hygiene products and frozen snacks are gaining good traction and growing in strong double digits. Hotels business will underperform in FY2021. Under the new dividend policy, the company declared dividend of Rs10.15 per share for FY2020.
Outlook
Discounted valuations of 15.1x and dividend yield of 5.2% makes it a good bet in FMCG space; we maintain our Buy recommendation on the stock with a revised price target of Rs. 240.
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