Accumulate ITC; target of Rs 438: Prabhudas Lilladher

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

This follows strong volume growth (15.2%) following stable prices from last 3 years and significant clamp down on smuggled cigarette industry. We believe just small increase (16% increase in NCC cess) in cigarette taxes in FY24 Budget bodes well for volume growth (5.7% and 5% estimated for FY24/25). Non cigarette businesses reported 44% growth in EBIT and outlook remains positive for FMCG (Demand revival and benign input costs), Hotels (ARR and Occupancy led) and Agri, even as Paper and Paperboard margins have peaked out (softer prices). While near term outlook is strong, we estimate 10.7% EPS CAGR over FY23- 25. ITC has significant levers to increase cigarette profitability as current margins are 10ppt lower than FY20 peak margins. ITC trades at 20.8x FY25 EPS with ROE/ROCE of 30.3/36.0% and ~80%+ dividend payout. Any punitive increase in GST on cigarettes is a key risk to our call. Retain Accumulate.

We increase our FY23/FY24/FY25 EPS by 1/6.2/7.3% and target price to Rs438 (Rs365 earlier) as we increase PE multiple for cigarette business from 16x to 20x.

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.