Reduce ITC; target of Rs 213: Dolat Capital

Dolat Capital recommended reduce rating on ITC with a target price of Rs 213 in its research report dated July 24, 2020.

Broker Research

July 26, 2020 / 14:45 IST

26 Aug, 2025 12:21

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Dolat Capital's research report on ITC

ITC’s Q1FY21 revenue, EBITDA and APAT were below our estimates. The cigarette business posted ~29% YoY de-growth, vs our estimate of 25% decline. A 970bps decline in margin in the cigarette business indicates that the product mix was unfavorable and economy brand contribution must have increased during the quarter. Significant increase in duty has resulted in widening of price gap between ITC and smuggled cigarettes. We believe that this would continue to pressurize volume growth even after lockdown re-opens. FMCG business exhibited satisfactory performance with 10% revenue increase and 120bps margin expansion. We have lowered our FY21E and FY22E EPS estimates to Rs 10.6 and Rs 12.0 to factor in Q1 performance and extension in lockdown.

Outlook

Though the stock is trading at a steep discount to other FMCG peers, we believe that the stock would remain under pressure. Consequently, we maintain Reduce with TP of Rs 213.