KR Choksey has given Buy recommendation for ITC with a target price of Rs. 310 in its research report issued on Nov 01, 2021

KR Choksey’s research report on ITC

ITC’s revenue during the Q2FY22 stood at INR 148,444 Mn (+12.9% YoY / +4.2% QoQ). The growth was driven by strong recovery across all the operating segments including Cigarettes (+10.5% YoY). Cigarettes volume witnessed smart recovery with exit volumes near pre-covid levels. The FMCG – Other’s performance was led by snacks, confectionery, and beverages; the segment delivered resilient performance growing on a high base of Q2FY21. ITC witnessed sharp rebound in out of home consumption on the back of improved mobility even as at home consumption moderates. ITC is focusing on expansion of distribution network and innovation which will help the company to sustain its growth trajectory in near to medium term. The pandemic impacted Hotels segment witnessed progressive recovery, its revenue grew by 254.5% YoY. For H1FY22, revenue stood at INR 290,851 Mn (23.1% YoY). Leisure destinations continued to perform well while business travel gathered momentum. Faster recovery in the segment was driven by increased occupancy rate (3x of Q2FY21).


Since our last recommendation, the stock price of ITC achieved our target price of INR 228. We value ITC shares using an SOTP (Sum of the parts) approach implying 10.1x EV/EBITDA on FY24E to Cigarette business (earlier 9.2x on FY23E); 18.8x EV/EBITDA on Hotel segment (earlier 16.1x on FY23E); an average 5.5x EV/EBITDA on Agri/Paper business (earlier 5x on FY23E); and 10.2x on EV/Revenue on FMCG segment (earlier 7.8x on FY23E) – we revise our target price to INR 310 per share; an upside of 39% over the CMP. Accordingly, we assign a “BUY” (earlier ACCUMULATE) rating on the shares of ITC Ltd.

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