Buy ITC; target of Rs 305: KR Choksey

FMCG major ITC reported its Q3FY17 results which were in-line with expectation except for EBIDTA below expectation. Revenue for Q3FY17 stood at INR 135669.7 Mn with the growth of 4.7% yoy and de-growth of 0.3% qoq. EBIDTA for Q3FY17 was at INR 35463.9 Mn with the growth of 2.1% yoy and de-growth of 2.3% qoq with EBIDTA margins at 26.1% which was lower than Q2FY17 by 52bps. PAT remained at INR 26467.3 Mn with the growth of 5.7% yoy and 5.9% qoq and PAT margins was at 19.5% which was an improvement yoy and qoq. Company has changed the Accounting Standard to IND -AS from Q1FY17.

OutlookWe expect ITC Ltd to post its revenue growth around 10-12% in FY18E & FY19E and growth will be driven mainly by its FMCG and other businesses. At the CMP of INR 258, ITC is trading at an EPS of INR 11.2 its FY19E. We recommend ‘BUY’ rating on the stock, with a target price of INR 305 that offers a potential upside of 18.1% from the current levels.