Sharekhan has given Buy recommendation for ITC with a target price of Rs. 280 in its research report issued on Sep 23, 2021

Sharekhan’s research report on ITC

With improving mobility, regularisation in store operations, and no hike in tax rate on cigarettes in the recent GST meet will help cigarette volumes to recover at a good pace in the coming quarters (100% recovery by Q2/Q3FY22). Non-cigarette FMCG business revenue growth to improve to mid-teens with expected recovery in out-of-home category; market share gains in personal care and biscuits and scale-up in recently acquired businesses in the quarters ahead. Non-cigarette FMCG business OPM expanded by 590 bps to 8.9% over the past four years; the company is focusing on scaling in contribution of high-margin products, premiumisation through new launches, and supply and operational efficiencies to improve business margins ahead.

Outlook

We retain Buy on ITC with a revised PT of Rs. 280; discounted valuations at 17.4x its FY2023E EPS, improving business outlook and dividend yield of 4.4% make it an attractive bet in the FMCG space.

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