Prabhudas Lilladher has given Buy recommendation for ITC with a target price of Rs. 305 in its research report issued on May 18, 2022

Prabhudas Lilladher’s research report on ITC

ITC posted resilient performance with ~8.75% cigarette volume growth and margin expansion across Cigarettes, paperboard and FMCG business. Hotels improved however it still remains in the red. Near term outlook remains positive given 1) positive cigarette volume traction given stable tax regime 2) Strong pricing and benefits of backward integration in paper board 3) benefits of supply chain disruption in leaf tobacco and strong wheat exports 4) Gradually improving ARR and occupancy levels in Hotels and 5) Sustained growth across in core segments in FMCG with steady margin expansion. Although we expect near term margin pressure in FMCG, however strong traction in other businesses will enable ITC to sustain double digit profit growth. ITC trades at 18.2x FY24 EPS with 10% EPS CAGR over FY22-24. We note ROE/ ROCE of 27%/32% and ~80%+ dividend payout are positives.


We increase valuation of cigarettes to 16x on improving growth and stable taxation (15x earlier) despite LT risks and assign higher multiples for FMCG and paper business. We increase SOTP based target price to Rs305 (Rs285 earlier) Maintain BUY.

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