Sharekhan has given Buy recommendation for ITC with a target price of Rs. 265 in its research report issued on Feb 11, 2021

Sharekhan’s research report on ITC

ITC’s Q3FY2021 cigarettes sales volume declined by ~7% (net sales declined by ~8%), better than 12% volume decline (net sales decline of 14%) in Q2FY2021. Non-cigarette FMCG maintained its double-digit revenue growth momentum and margin scale up; business revenue grew by 11% on comparable basis and margins were up by 150 bps to 9.2% (YTD EBIDTA margin stood at 8.9% versus FY2020 EBIDTA margin of 6.8%). With no increase in tax rate on cigarettes, we expect cigarette sales volume to gradually pick up; FMCG is gaining good traction and will maintain its double-digit revenue growth and OPM expansion. Hotel business is expected to come back on track in FY2022.


The stock is currently trading at discounted valuation of 16.1x its FY2023E EPS. Consistent improvement in non-cigarette FMCG margins along with normalisation of cigarette would be key re-rating trigger for the stock. We maintain Buy with a revised PT of Rs. 265.