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Buy ITC; target of Rs 355: Motilal Oswal

Motilal Oswal is bullish on ITC recommended buy rating on the stock with a target price of Rs 355 in its research report dated August 01, 2022.

August 04, 2022 / 06:16 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

 
 
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Motilal Oswal's research report on ITC


Sales growth momentum was better than expected across businesses in 1QFY23. Barring the Agri business, where the ban on wheat exports may result in relatively muted growth in subsequent quarters, momentum in other businesses is expected to remain robust. As highlighted in our upgrade to Buy note as well as our FY22 annual report note, strong earnings momentum (16% EPS CAGR over FY22-24 v/s ~5% in the preceding five years) is being led by good performance from Cigarettes in a stable tax environment, healthy recovery in profitability for the Hotels business, and continued good performance from FMCG-Others. Unlike peers, pressure on material costs is far lower. Allied with better capital allocation and continued healthy dividend payout, the path towards high 20s or early 30s RoE is visible. We maintain our Buy rating.



Outlook


We maintain our earlier assigned 21x EPS multiple, a 65% premium to its global peer average, and roll forward to Jun’24 earnings The stock has done well, with gains of ~17% since our upgrade to Buy in Jun’22. We see scope for further upside, based on a healthy earnings outlook. We maintain our Buy rating.

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ITC - 020822 - moti

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first published: Aug 4, 2022 06:14 pm
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