Buy ITC; target of Rs 522: Sharekhan

Sharekhan's research report on ITC

ITC reported 9.6% y-o-y net revenue growth in Q4FY25, led by the agri business, while OPM fell 242 bps y-o-y to 34.7% due to raw-material inflation, resulting in just a 1% y-o-y growth in the PAT. Cigarette and FMCG businesses saw revenues rise 6% and 4% y-o-y, respectively, while PBIT margins declined y-o-y. Agri biz performed better, with an 18% y-o-y revenue growth and y-o-y margin expansion. Continued recovery in rural demand, slowing inflation, tax cuts announced in Union Budget 2025, pick up of the government capex from H2FY25 and front loading of capex in FY26, interest rate cuts and RBI liquidity to support growth in coming quarters.

Outlook

The stock continues to trade at discounted valuations of 24x and 22x its FY26E and FY27E EPS, respectively. We maintain a Buy with an unchanged PT of Rs. 522.

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