Buy ITC: target of Rs 280: Sharekhan

Sharekhan is bullish on ITC has recommended buy rating on the stock with a target price of Rs 280 in its research report dated September 23, 2021.

Broker Research

September 27, 2021 / 03:23 PM IST

500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" title="HDFC Securities research report's outlook and valuations: "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" width="770" height="431" >

HDFC Securities research report's outlook and valuations: "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."

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Sharekhan's research report on ITC

With improving mobility, regularisation in store operations, and no hike in tax rate on cigarettes in the recent GST meet will help cigarette volumes to recover at a good pace in the coming quarters (100% recovery by Q2/Q3FY22). Non-cigarette FMCG business revenue growth to improve to mid-teens with expected recovery in out-of-home category; market share gains in personal care and biscuits and scale-up in recently acquired businesses in the quarters ahead. Non-cigarette FMCG business OPM expanded by 590 bps to 8.9% over the past four years; the company is focusing on scaling in contribution of high-margin products, premiumisation through new launches, and supply and operational efficiencies to improve business margins ahead.

Outlook

We retain Buy on ITC with a revised PT of Rs. 280; discounted valuations at 17.4x its FY2023E EPS, improving business outlook and dividend yield of 4.4% make it an attractive bet in the FMCG space.