Buy ITC; target of Rs 515 Sharekhan

Sharekhan's research report on ITC

In a three-pronged move, ITC is focusing on three growth horizons - 1) Extend and grow the core business, 2) Building emerging businesses and 3) Creating viable opportunities under new vectors for growth. FMCG business’ EBITDA margins to consistently improve by 80-100 bps y-o-y; RoCE to rise 300-350 bps p.a. (currently at 18% excluding intangibles). Prudent capex of Rs. 3,000-3,400 crore p.a. with a 35-40% investment in FMCG business, 30% investment in paperboard, paper & packaging and the remaining 30-35% in new vectors/digitalisation and backward integration.

Outlook

We retain a Buy with an unchanged PT of Rs. 515. Stock trades at attractive valuations of 23x/20x its FY2025E/26E earnings.