Sharekhan is bullish on ITC has recommended buy rating on the stock with a target price of Rs 325 in its research report dated August 05, 2019.
Sharekhan's research report on ITC
1QFY20 PAT of INR3.7b (significantly ahead of estimates), was led by higher treasury gains and lower provisions of INR7.9b (v/s est. of INR10.6b). NII declined 1% YoY to INR17.8b (in-line); however, domestic margins declined 10bp QoQ to 2.9% due to 5bp increase in cost of funds. Other income grew 58% YoY led by treasury gains of INR2.0b. Total income trailed opex growth of 16% YoY, resulting in modest PPoP growth of 6% YoY. C/I ratio stood at 44.6% (v/s 46.6% in 4QFY19). Loan book grew 12% YoY (2% QoQ decline) to INR1.8t while deposits grew 15% YoY to INR2.4t. Share of the RAM advances stood at 60.5% (v/s 56.4% in 1QFY19). CASA deposit growth moderated at 3.5% YoY, leading to a decline in CASA ratio to 34.2% (v/s 35.5% in FY19).
We have increased our other income estimates leading to ~17%/14% increase in our FY20/FY21 earnings. Thus, RoA/RoE should improve to 0.6%/11% by FY21E. Maintain Buy with a revised TP of INR250 (0.7x FY21E ABV).
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