Buy ITC; target of Rs 351: KR Choksey

FMCG major ITC reported its Q1FY17 results, revenue was above expectation, and margins were in-line with our estimates. Its Sales for Q1FY17 stood at INR 132530.6 Mn with the growth of 8.3% yoy and de-growth of 6.3% qoq. EBIDTA for Q1FY17 was at INR 35262.3 Mn with the growth of 8.4% yoy and de-growth of 2.3% qoq and its margins remained at 26.6%. PAT was at INR 24482.4 Mn with the growth of 17.6% yoy and 15% qoq and PAT margins was at 18.5%. Company has changed the Accounting Standard to IND -AS and has provided gross numbers for segment.

FMCG major ITC being a largest in its segment is sustaining in the challenging environment and we believe that on tax front ITC is facing issue with higher excise and VAT tax also demand slowdown in FMCG others segment. Despite slowdown ITC has shown sustained growth and has been a strong player with focus on improving its business segment and enter new segments with innovative products and to maintain its leadership position and brand image. We expect ITC Ltd to post its revenue growth around 9% & 10% in FY17E & FY18E and growth will be driven mainly by its FMCG and other businesses. At the CMP of INR 250, ITC is trading at a EPS of INR 10.2 its FY18E. We recommend ‘BUY’ rating on the stock, with a target price of INR 351 that offers a potential upside of 40.5% from the current levels. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.