Buy ITC; target of Rs 365: ICICI Direct

ICICI Direct is bullish on ITC has recommended buy rating on the stock with a target price of Rs 365 in its research report dated October 29, 2018.

Broker Research

October 31, 2018 / 13:48 IST

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Direct's research report on ITC

ITC’s cigarette segment posted robust volume growth of ~6% in Q2FY19. Cigarette volumes had grown 1.5% in Q1FY19 after three consecutive quarters of volume de-growth. In addition to strong growth from the cigarette segment, sales growth of 7.3% YoY was supported by FMCG, agri business, paperboard & hotels business growth of 12.7%, 12.8%, 8.8% & 20.8%, respectively Operating profit grew 11.8% to Rs 4,206 crore supported by 8.7% & 13.4% EBIT growth in cigarette & paperboard segments. FMCG EBIT witnessed a significant improvement from Rs 20.5 crore to Rs 58.5 crore on the back of strong growth in the branded packaged foods business, better product mix and cost rationalisation initiatives. Similarly, hotels EBIT increased from Rs 4.2 crore to Rs 15.6 crore on the back of increase in occupancy to 67-68% & strong F&B sales. However, agri segment EBIT declined 7.8%. On the back of higher operating profit, net profit grew 11.9% YoY to Rs 2,954.7 crore.

Outlook

With the government’s impetus to boost rural incomes coupled with normal monsoons this year, we expect to witness a broad based recovery in volume growth. In the current year, we are expected to witness 4% volume growth in cigarettes after five years of decline and 13.9% sales CAGR in FMCG on the back of focus on premiumisation across brands. We expect revenue and earnings to grow at a CAGR of 10% and 11.6%, respectively. We value the stock on an SOTP basis valuing the cigarette business at 30x PE and FMCG business at 5x price/sales. We continue to maintain our BUY rating on the stock with a target price of Rs 365.

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