Brokerage house Prabhudas Lilladher is bullish on ITC and has recommended 'Buy' rating on the stock with a price target of Rs 358 in its research report dated October 25, 2013.
Prabhudas Lilladher's report on ITC
"ITC reported Adj PAT of Rs21bn on the back of 15.9 percent EBIT growth in Cigarettes even as Hotels and Paperboard businesses disappointed, resulting in Non‐cigarette business EBIT decline of 5 percent YoY, mainly led by 58 percent decline in losses in the FMCG business. Cigarette volumes declined 3.7 percent (est2.5 percent) as higher prices continued to impact demand. We expect continued softness in Paper and Hotels business in the near term. FMCG sales growth at 16 percent was lowest in past 10 quarters and has the potential to delay the likely turnaround in FY14. We are reducing FY14 and FY15 EPS estimates by 2 percent to Rs10.8 and Rs13.1 which factors in 1) lower margins in paper business 2) delayed recovery and lower margins in Hotels and 3) flat cigarette volumes in FY14 and 4.8 percent volume growth in FY15. Sustained weakness in cigarette volume growth and slowdown in FMCG demand remains a key risk to further re‐rating of the stock. We value the stock at Rs 358 on SOTP. Maintain 'BUY'," says Prabhudas Lilladher research report.
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