Buy ITC; target of Rs 364: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on ITC

ITC reported healthy 6% cigarette volume growth and 8.7% EBIT growth on QoQ improvement in cigarette demand. This has been the highest volume growth since 4QFY12 (6%). Recovery in demand, stabilization of sales mix and cigarette prices and stable taxation regime can result in gradual recovery post 17% decline in volumes in past 5 years. We expect FMCG business led by processed foods to show steady increase in profitability given that some of the businesses like Biscuits and Atta have achieved economies of scale and personal care is stabilizing, however Lifestyle retailing would remain a drag. Paperboard margins are expected to improve given benign input costs and revamp of the 1.5 lakh TPA value added paperboard machine. We expect higher ARR, occupancy rates and growth in F&B sales to improve profitability in Hotels. However, Agri business led by leaf tobacco would take time to recover, despite some relief from INR depreciation.

Outlook

ITC trades at 22.5xSept EPS, 35-40% discount to our coverage universe, which limits downside in the stock. Retain "Buy" with SOTP based target price of Rs364 (Rs364 earlier).

For all recommendations report, click here

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