Buy ITC;target of Rs 365: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on ITCGovernment has hiked Cigarette excise duties by 10%, fifth consecutive year of a double digit hike but lowest in last five years. 10% excise duty increase is lower than our expectations of 15% hike. Excise hike for Small filter segment (<65mm) is similar as RSFT and Kings, a departure from previous two years trend, positive from volumes perspective. We revise our EPS upwards by 2-2.5%. Stock has underperformed Sensex by 18% over last two years and trades at an attractive valuations of 21x FY17 (~35% discount to sector) and a 3% dividend yield. With budget overhang behind, combination of muted expectations and attractive valuations makes the risk-reward favorable, in our view. Upgrade to BUY with a revised TP of INR 365 (23x FY18 EPS, unchanged 15% discount to three year average P/E) Prior to budget we were building in 15% excise duty increase in Cigarettes with 5% Cigarette volume decline for FY17. We now revised our volume assumptions to 3% decline. FY17 volumes should also benefit from an optical low base (after four consecutive quarters of sharp double digit volume decline, 3Q16 Cig volumes declined 5%). We revise our EPS estimates for FY17E and FY18E marginally by 2-2.5%. Our FY17E and FY18E EPS now stand at INR 13.9 and INR 15.9, respectively. 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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