ITC Ltd. share price target

The competitiveness of ITC's diverse businesses rest on the strong foundations of institutional strengths derived from its deep consumer insights, cutting-edge Research & Development, differentiated product development capacity, brand-building capability, world-class...

ITC remains our top pick in the large cap consumer space, as its growth trajectory is rising at a time when the ask rate remains low (unlike its peers), given its steep valuation discount vs. the sector (~40%). We expect the valuation gap to narrow as growth converges with the sector. ITCs 4Q/FY19 performance was robust vs. its delivery over FY15-18. Cigarette volume growth has returned owing to a stable tax regime, which validates our thesis that ITCs performance will improve as affordability returns. We arent too perturbed with near term margin pressure, as cigarette biz commands the highest margins across industries (volumes matter). We maintain BUY and value ITC on FY21E EPS at 32x, arriving at a TP of Rs 398.

View: Volume growth improvement continues; Maintain Buy. ITC's Q4FY19 results were marginally ahead of our estimates. The cigarette business posted +9% volume growth, which was ahead of our estimate of 7%. However, decline in margins in the cigarette business is a cause for concern. Despite sluggish demand in Q4, ITC's FMCG business delivered 7.3% increase in top-line and 100bps expansion in margin, was encouraging. We have maintained our FY20E and FY21E EPS estimates at ` 11.2 and ` 12.2, respectively. In our view, the stock is trading at a steep...

Selective cigarettes price hikes to support margins Cigarette business EBIT increased by 10% on the back of stable taxation regime during the year. ITC has taken price hike in 20% of its cigarette portfolio by increasing the prices of Flake Excel by 11%, Bristol by 6.7% and Capstan by 14.5%. This selective price hike would result in average price hike of 3%. The recent price hikes are undertaken in the lower end of the portfolio and brands such as Capstan, Bristol and Flake Excel have very limited preference in urban markets but are largely sold in tier-II and tier-III...

Q4FY2019, ITC's net revenue grew by 12.9%, driven by 11.1% growth in the core cigarette business, ~25% growth in the hotel business and high-teen growth in both the agri and paperboard, paper & packaging (PPP) business. The core cigarette business volumes grew by 8-9%, better than our as well as the street's expectation of mid single-digit volume growth....

Cigarette volume growth ahead of street expectations, FMCG Business continues with its profitable growth, Other Business supporting overall profitability

ITC's cigarette segment posted robust volume growth of ~8% in Q3FY19 led by higher growth of 64 mm segment (~40% of cigarette volumes). 69 mm segment contributed 38-39% of cigarette sales volume and remaining ~20% was contributed by Long & King size segments. All other businesses reported double digit sales growth resulting in overall revenue growth of 14.9% YoY during the quarter Operating profit grew 11.2% to | 4,325.8 crore supported by Cigarette, FMCG & Paperboard segments. FMCG EBIT increased from...

Reiterate BUY. Our TP is Rs 383, at 32x Dec-20E EPS. ITCs revenues grew by 15% (exp. 11%) driven by non-cigarette portfolio growing by 17% (exp. 13%). Cigarette (cig) revenues grew by 9.6% (exp. 8.5%) driven by 7 year high volume growth of ~7.5% (exp. 6%; -4% in 3QFY18). Although cig. EBIT growth was a tad bit slower at 8.8%. EBITDA/ APAT grew by 11/14% vs. exp. of 12/11%. The co. clocked its fastest APAT growth in 17 quarters!

23 January 2019 grew 9.6% YoY. EBIT margin contracted by 50bp YoY, led by higher input cost and higher salience of capsule cigarettes in the sales mix. Consequently, segmental EBIT growth of 8.8% YoY lagged sales growth during the quarter. v/s INR470m in the year-ago period. Revenue of Agri Business/Paperboards, Paper & Packaging/Hotels grew by 25.7%/20.5%/11.7% YoY.