Buy ITC; target of Rs 517: KR Choksey

KR Choksey's research report on ITC

For Q4FY24, ITC reported consolidated gross sales of INR 194,465 Mn, a growth of 2.0% YoY while flat on a sequential basis. Gross sales were in line with our estimate. For FY24, gross sales were marginally lower YoY (-0.4% YoY) at INR 768,405 Mn. For Q4FY24 EBITDA was at INR 66,262 Mn. EBITDA was 1.6% lower than our estimate due to higher other expenses. PAT at (-1.1% YoY/ -4.0% QoQ) to INR 51,206 Mn due to higher tax and D&A expenses. For FY24, PAT grew by 6.6% YoY to INR 204,588 Mn. Exceptional item for the quarter includes INR 21 Mn related to the demerger of the Hotel business. Adj. PAT for the quarter grew by 0.4% YoY and declined by -4.1% QoQ to INR 51,226 Mn while for FY24, it grew by 7.0% YoY to INR 204,664 Mn. We reduce our FY26 Adj. EPS by 3.6% due to lower Agri and paperboard revenues amidst macro pressures.

Outlook

We apply SOTP approach and maintain our multiples (cigarette business at 15.2x EV/EBITDA, Hotels at 17.3x, Paper business at 4.1x, Agri business at 4.5x, and FMCG at 8.2x EV/Revenue) and arrive at a target price of INR 517/share (previously: INR 533). We maintain our "BUY" rating on ITC Ltd.