Prabhudas Lilladher is bullish on ITC has recommended buy rating on the stock with a target price of Rs 367 in its research report dated August 02, 2019.
Prabhudas Lilladher's research report on ITC
We are cutting FY20 and FY21 EPS estimates of ITC by 2.1% and 3.7% following disappointing cigarette volume growth of 2.5%. We believe that coming quarters in FY20 will show low single digit volume growth given 6.5-7.5% volume growth in base quarters, and challenging consumer environment. FMCG business has reported 5.9% (up 150bps YoY) which reinforces our confidence of double digit EBIDTA margins over next 3-5 years. Although ITC is likely to face near term headwinds in demand, long term outlook looks promising given sustained innovations new launches in snacking and dairy. Paperboard business is in fine fettle given gains from steady prices and benign input costs. Hotels ARR and occupancy indicates steady improvement in profits, however we are far off from pre 2009 profitability. ITC trades at 21.5xFY21 EPS, ~40% discount to our coverage universe with 2.2% dividend yield. Risk reward remains favorable, although returns might be back ended due to poor visibility on cigarette volume growth.
Retain "Buy" with SOTP based target price of Rs367 (Rs369 earlier).
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