Buy ITC; target of Rs 515: Sharekhan

Buy

Sharekhan's research report on ITC

ITC’s Q2FY24 operating performance was largely in line with our expectation with net revenues and operating profit growing by ~3% each. Higher other income led to 10% y-o-y growth in PAT. Cigarette sales volumes grew by ~5%, while non-cigarette FMCG business revenues grew by 8% with EBIDTA margins sustaining at 11%. Hotels business clocked a strong performance with revenues and PBIT growing by 21% and 50%, respectively. Cigarette volume growth to stay steady, non-cigarette FMCG performance to improve with sustained expansion in margins, while performance of paperboard, paper and packaging is expected to improve as fall in the global paper pulp prices have bottomed out.

Outlook

Stock trades at 26x/23x its FY2024E and FY2025E earnings. We maintain a Buy rating with a revised SOTP-based PT of Rs. 515.

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ITC - 20 - 10-2023 - khan