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Last Updated : Jun 29, 2020 07:07 AM IST | Source: Moneycontrol.com

Neutral ITC; target of Rs 190: Motilal Oswal

Motilal Oswal recommended Neutral rating on ITC with a target price of Rs 190 in its research report dated June 27, 2020.

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Motilal Oswal 's research report on ITC


ITC’s 4QFY20 results were lower than expectations. While our checks suggest that cigarette volumes have returned to near-normalcy now, the possibility of further GST increase is fairly high over the next few months. While valuations appear inexpensive at 15.1x FY22E EPS, the narrative on ITC has changed over the past year with ESG concerns over cigarettes increasing worldwide. Consequently, global tobacco peers have witnessed sharp contraction in their multiples. For ITC, 85% of EBIT came from cigarettes in FY20. We maintain Neutral on account of (a) ITC’s overall profitability being highly dependent on cigarettes (which is likely to continue), and (b) risk to the already weak earnings growth projections over FY20-22E due to overhang of the GST increase.



Outlook


The stock is trading at 15.1x FY22 EPS. We value ITC at 14x Jun’22 EPS (20% premium to global peers average multiple) to arrive at TP of INR190. Maintain Neutral.




For all recommendations report, click here

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First Published on Jun 29, 2020 07:07 am
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