Buy ITC; target of Rs 355: Sharekhan

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26 Aug, 2025 12:21

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Sharekhan's research report on ITCITC’s Q3FY2016 net revenues grew by 2.6% YoY to Rs 9,176.7 crore. Its core cigarette business revenues grew by ~6%, while non-cigarette FMCG business revenues grew by 7% during the quarter. The gross profit margin (GPM) improved by 254BPS YoY to 63.7% and the operating profit margin (OPM) improved by 55BPS YoY to 39.3% (largely sustained on a sequential basis). The operating profit grew by 4.1% YoY to Rs 3,605.2 crore. However, higher incidence of tax led to PAT standing almost flat on a Y-o-Y basis. The stock has already corrected by 12% in the last two months and is trading at a discounted valuation of 21.8x its FY2017E earnings. We believe, most of the negatives have been priced in the current valuation and hence the downside risk is limited. ITC’s near-to-medium term focus sustains on improving the growth prospects of non-cigarette FMCG business and making it as one of the key drivers in long run. In view of the discounted valuation to some of the large-cap peers, we have maintained our Buy recommendation on the stock with a revised price target of Rs 355. The government maintaining the excise rate on cigarette in the upcoming budget would act as key trigger for the stock. 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.

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