ITC Ltd. share price target

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.

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

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

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.

For Q4FY24, ITC reported consolidated gross sales of INR 194,465 Mn, a growth of 2.0% YoY while flat on a sequential basis. Gross sales were in line with our estimate.

ITC's Cigarette and FMCG performance was healthy, while the nonconsumer business (Paper and Agribusiness) remained weak. Consolidated revenue grew 2% YoY (est. +4.5%).