HDFC Securities is bullish on ITC has recommended buy rating on the stock with a target price of Rs 367 in its research report dated July 27, 2018.
HDFC Securities's research report on ITC
ITC’s net revenues grew by 13.5% (exp of 8.2%) beating estimates for all segments except Paper business. Cigarette value growth was at ~9% (exp. 8%) with volume growth of ~1% (exp. flat). EBITDA/ APAT grew by 7/10% vs. exp. of 12/10%. ITC has consistently improved cigarette performance after seeing steep rise in taxes in FY18. As per the management, cigarette volume trajectory is gradually improving. Therefore, we believe ITC can deliver low-mid single digit volume growth in the coming 3-4 quarters supported by favourable base (-6/-4-3% in 2Q/3Q/4QFY19) and expectation of no steep rise in taxes (healthy GST collections).
At 26x FY20E EPS, ITC trades at an unfair discount of ~35% to the sector. Reiterate BUY. Our TP is Rs 367, at 32x Jun-20E EPS.
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