Buy ITC; target of Rs 320: Dolat Capital

Dolat Capital bullish on ITC has recommended buy rating on the stock with a target price of Rs 320 in its research report dated January 23, 2019.

Broker Research

January 30, 2019 / 08:30 IST

26 Aug, 2025 12:21

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Dolat Capital's research report on ITC

ITC’s Q3FY19 results were marginally ahead of our estimates. The cigarette business posted 8% volume growth, which was marginally more than our estimate of 7%. The company’s FMCG business reported a strong 11.5% jump. In addition, a 25.7% revenue growth in the Agri businesses was encouraging, as this was the third consecutive quarter of strong growth. Continuous volume increases in cigarette business is a key positive. However, decline in margins in the cigarette business is a cause for concern. Nevertheless, we believe that ITC benefits from a strong leadership in the category and it is likely to increase prices to improve margins, post volume growth stabilization. Going ahead, we believe volume growth will continue to improve, given the delay in duty hike. Considering the constant increase in smuggled cigarettes, the increase in duty is likely to be modest, whenever it happens. Further, ITC’s entry in new FMCG categories, such as dairy, juices and impetus to accelerate growth in existing categories will potentially increase profitability. We have upward revised our FY19E and FY20E EPS estimates to ` 10.1 and ` 11.2, respectively.

Outlook

We introduce FY21E EPS at ` 12.2. In our view, the stock is trading at a steep discount to peers and is an attractive bet. We value the stock at 26x PE, to arrive at a TP of ` 320. Upgrade to BUY.

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