Sharekhan's research report on ITC
ITC’s Q1FY2024 performance beat our expectations, largely led by better-than-expected OPM of 39.5% (up by 682 bps y-o-y and 162 bps q-o-q) resulting in 18% y-o-y growth in PAT (with other income high by 2.3x); net revenues fell by 9% y-o-y due to high base of Agri business. The highlight of the quarter was an 8% volume growth in core cigarette business while non cigarette FMCG business grew by 16% with consistent improvement in EBIDTA margins to 11%. Hotels business will be demerged at entitlement ratio of 1:10 (1 share each of demerged entity for 10 shares held in ITC); Demerged entity will be listed in next 15 months.
Outlook
Stock trades at 25x/22x its FY2024E and FY2025E earnings. We maintain a Buy rating with a revised SOTP-based PT of Rs. 496.
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