Prabhudas Lilladher has given Buy recommendation for ITC with a target price of Rs. 258 in its research report issued on Jul 25, 2021
Prabhudas Lilladher’s research report on ITC
We are marginally decreasing FY22/23 EPS estimates by 2%/1.2% on account of lower other income which halved during 1Q. Cigarette volumes recovery has been impacted due to restrictions in Kerala, Odisha and NE and recovery is expected to be slower than expected. FMCG margins have seen benefit of higher scale, rigorous cost control, closer to market production units and rising direct coverage and trend is expected to continue. Paperboard has gained margins in inflationary input cost scenario due to backward integration and medium term outlook remains intact. We expect Hotels business recovery to be delayed due to the second wave however traction at leisure locations bodes well for the company. Agri business outlook looks good for near term as supply chain has been restored and recovery in leaf tobacco exports has improved the sales mix. ITC trades at 13.5x FY23 EPS, steep discount to our coverage universe with ~5% dividend yield and 12.3% EPS CAGR over FY21-23.
Maintain BUY with an unchanged SOTP based target price of Rs 258