Buy ITC; target of Rs 347: Sharekhan

Sharekhan's research report on ITC

ITC registered mixed performance in Q3FY2019 with revenue, growing by strong 15%, while the decline in OPM (by 124 BPS y-o-y) resulted in operating profit to grow by 11.2%. ITC’s cigarette sales revenue grew by ~10% (driven by ~7% volume growth), but PBIT margin declined by 50 BPS, largely due to unfavourable revenue mix and higher raw material cost. Improving growth prospects of the cigarette business and discounted valuations at ~22x its FY2021E earnings make ITC a better pick in the FMCG space.

Outlook

We maintain our Buy rating with an unchanged PT of Rs. 347.