Buy ITC; target of Rs 270: Prabhudas Lilladher

Prabhudas Lilladher's research report on ITC

ITC’s first Investor meet highlighted strategic growth drivers and its strategy around ESG principles. ITC is committed to sustain growth across key segments led by cross segment synergies, innovation, digital, GTM initiatives and entry in new categories. ITC is committed to asset light business model in Hotels and value unlocking in FMCG, although no concrete road map was disappointing for investors who have been pinning hopes for the same. We believe ITC will target aggressive organic and inorganic growth in ITC Infotech given huge growth opportunity with little chances of any demerger or listing in near term. We believe FMCG and IT Services will unlock maximum value for shareholders over the years, with no short cuts in near term.

Outlook

we remain positive on business strategy, although uncertainty on cigarette taxation and global aversion to investment in Tobacco stocks remains an overhang. ITC trades at 16.3x Sept23 EPS, with ~4.5% dividend yield and 10.7% EPS CAGR over FY21-24, 55% discount to coverage universe. Maintain BUY with SOTP based target price of Rs270.