ITC Ltd. share price target

ITC’s net revenues (including other operating income) grew by 9.6% y-o-y to Rs. 17,248 crore driven by 6% y-o-y growth in the cigarette business’s net revenues and a 17.7% y-o-y growth in the agribusiness’s revenue.

Sales 3% higher vs consensus likely on strong cigarette volumes. EBITDA 5% above cons. on higher margins

We are upgrading ITC from Accumulate to BUY as we expect current margin/growth pressures to subside post 1H26. ITC is suffering margin pressure in cigarettes (high leaf tobacco prices and volume focused strategy), Paper (High wood prices and dumping) and FMCG (Tepid volumes, high input costs and hit in stationary business). However, we expect the scenario to change as leaf tobacco prices have started softening in current season, new wood supplies, integration of century paper and bottomed out margins (~40%...

For Q3FY25, ITC’s revenue grew 9.1% YoY (-5.5% QoQ) to INR 203,500 Mn, largely in line with our estimates (-1%). EBITDA increased 2.4% YoY (-2.9% QoQ) to INR 63,619 Mn, missed our estimates due to higher-than-expected operating expenses. EBITDA margin contracted by 226bps YoY (+108bps QoQ) to 33.9%.

ITC delivered consolidated revenue growth (ex-hotel business) of 9% YoY (beat) in 3QFY25, mainly led by the cigarette business. EBITDA grew by 2% YoY to INR63.6b. APAT declined 7% YoY to INR48b.

Sales were 3% higher vs consensus likely reflecting strong cigarette volumes. EBITDA was 5% below expectations due to inflation

With an upside potential of 16% from the CMP, we maintain our BUY rating on the stock.

• ITC Ltd is demerging its hotel segment into a standalone entity, ITC Hotels Ltd. The demerger ratio is 1:10, meaning existing ITC shareholders will receive 1 ITC Hotels share for every 10 ITC shares.
• ITC Ltd will retain a 40.0% stake in the new entity, with the remaining 60.0% distributed to shareholders.

ITC will complete the demerger of its hotel business effective on 1st January, 2025 with the hotel business getting listed as a separate entity on 6th January, 2025. ITC will have 40% stake in the hotel business, while the remaining 60% will be distributed to ITC’s shareholders in proportion to their holdings.

On a consolidated basis, ITC topline grew by 15.6% YoY and 11.2% QoQ to Rs222,819 mn driven by growth in Hotels, Value Added Agri products and Leaf Tobacco.

ITC reported strong topline performance amidst a challenging operating environment.
For Q2FY25, the revenue increased 16.7% YoY (+12.3% QoQ) to INR 207,359 Mn, outperformed our estimate.

Sales were 12% higher vs consensus likely due to the volatile, pass-through-based Agri Business segment. EBITDA was in line

With an upside potential of 17% from the CMP, we maintain our BUY rating on the stock.

For Q1FY25, ITC reported consolidated net sales of INR 184,573 Mn (+7.5% YoY/ +3.0% QoQ), which was in line with our estimates.
Gross margin declined by 130 bps YoY (-271 bps QoQ).

With an upside potential of 12% from the CMP, we maintain our BUY rating on the stock.

Hotels and Agri segments drove sales with subdued performances in FMCG and cigarettes

ITC delivered a consolidated revenue growth of 8% YoY (in line) in 1QFY25. Gross cigarette revenue grew 6% YoY led by volume growth of ~3% YoY.