Buy ITC; target of Rs 595: Sharekhan

Sharekhan's research report on ITC

The effective date for the demerger of the hotel business is 1st January 2025, with 3rd January being the last date to be eligible to get shares of ITC Hotels. ITC Hotels plans to increase its room inventory from ~13,000 to ~18,000 keys within the next 4-5 years driven by an asset-light strategy (eyes managed hotel mix of ~65% from the current 55%). On January 6, 2025 (the ex-date of demerger), ITC’s stock price will be adjusted to Rs. 20-22 from the prevailing market price (considering 40% of ITC’s holding in the hotel business, with a 20% holding discount), while we expect the initial price discovery for ITC hotels to be in the range of Rs. 150-170 per share.

Outlook

We retain a Buy on ITC with an unchanged price target of Rs. 595 (not adjusted for hotel demerger). Discounted valuations of 23x/20x its FY2026E/27E EPS make it a preferred pick in the consumer goods space.