HDFC Securities has given Buy recommendation for ITC with a target price of Rs. 245 in its research report issued on Feb 12, 2021

HDFC Securities’ research report on ITC

ITC’s 3QFY21 was broadly in line as the company saw sequential recovery across categories. FMCG sustained broad-based double digit growth, and cigarettes continued sequential recovery. Cigarette net revenue/vol/EBIT clocked -8/-7/-8% YoY growth vs. our expectation of -3/-7/-7% growth. Comparable FMCG growth at 11% was ahead of peers like Britannia (6% YoY). Urban growth continued to lag rural for cigarettes, although the product mix improved. Increased mobility of consumers and gradual return to offices will support recovery in cigarettes over the next few months. FMCG continues to shine as new launches and the essentials portfolio maintained its momentum, and ITC continued to capitalise on the high demand for health, hygiene and packaged food products. OOH and discretionary categories are expected to continue the strong growth witnessed in 3QFY21.

Outlook

We remain optimistic on the company’s ability to delivery healthy earnings growth and maintain our EPS estimates for FY22/FY23. We value ITC on SoTP to derive a target price of Rs 245 (implied P/E of 18x P/E Mar-23E EPS). MaintainBUY.

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