Emkay Global Financial has given Buy recommendation for ITC with a target price of Rs. 270 in its research report issued on Oct 28, 2021

Emkay Global Financial’s report on ITC

Q2 performance was slightly ahead of estimates, with PAT growth of 14%. Cigarette sales/EBIT grew 10% yoy, recovering to 95% of pre-Covid levels. FMCG grew 3% yoy on high comparables (2-year CAGR 11%) and maintained 10% EBITDA margins. Cigarette recovery appears healthy with exit volumes at near pre-Covid. A further increase in mobility and ITC’s initiatives on portfolio expansion should drive a healthy recovery. However, a stable taxation policy remains key to sustaining steady growth ahead. FMCG sequential trends indicate a likely pick-up in growth in H2 as the base normalizes. Increasing cost pressure may, however, limit margin gains in the immediate term. Other divisions (Hotels/Agri/Paper) saw strong growth (EBIT up 63%), led by Paper/Hotels.


ITC’s IT business has seen strong rise in its profitability (PAT up 70% in H1) and we now value it at Rs12/share. We maintain Buy and arrive at a fair value of Rs270, based on a two-stage DCF growth model with a derived target PE multiple of 17.6x (Dec’23E EPS).

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