Prabhudas Lilladher is bullish on ITC has recommended buy rating on the stock with a target price of Rs 344 in its research report dated October 24, 2019.
Prabhudas Lilladher's research report on ITC
ITC has posted another steady quarter with 3% cigarette volume growth in a challenging environment. Overall business momentum is sustained with 6.5% comparable FMCG growth, strong margin outlook in paperboards and sustained margin expansion in FMCG business. Uptick in consumer demand holds key to volume recovery in FMCG even as ITC is gradually inching towards double digit EBIDTA margins over next 3-5 years. Paperboard business is in fine fettle given gains from steady prices and benign input costs. Hotels ARR and occupancy indicates steady improvement in industry dynamics. ITC will gain from deferred tax liability of Rs10.2bn from 2Q to 4Q20.
ITC trades at 18.5xFY21 EPS, ~50% discount to our coverage universe with 3% dividend yield and 10.5% PBT CAGR over FY19-22. Risk reward remains favorable, although uncertainty on cigarette taxation remains a drag. Retain "Buy" with SOTP based target price of Rs344.
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