ITC Ltd. share price target

At 27x FY20E EPS, ITC trades at an unfair discount of ~30% to the sector. We roll forward to Sep-20E EPS, valuing at 32x with TP of Rs 382 (earlier Rs 367). Maintain BUY. Time and time again the concern on ITC has been around tax hikes and its impact on the cigarette business. All challenges aside, the company has been able to deliver ~10% cigarette revenue CAGR in the last 10 years (in comparison to FMCG sector growing by 13%) despite muted volume growth. This reflects ITCs pricing power and leadership position.

We expect growth momentum to improve going forward given revival in cigarette business coupled with strong growth in FMCG and hotels. Hence, we factor sales/PAT to register CAGR of 9.6%/11.5% over FY18-20E driven...

Diversified group ITC Ltd.'s quarterly profit meets estimates. The Company delivered a healthy performance during the quarter amidst subdued demand conditions and continuing pressure on the legal cigarette industry. On a comparable basis, Gross Sales Value (net of rebates/discounts) for the quarter stood at Rs 18171.66 crores,...

Reiterate BUY. Our TP is Rs 367, at 32x Jun-20E EPS. ITCs net revenues grew by 13.5% (exp of 8.2%) beating estimates for all segments except Paper business. Cigarette value growth was at ~9% (exp. 8%) with volume growth of ~1% (exp. flat). EBITDA/ APAT grew by 7/10% vs. exp. of 12/10%.

ICICI Securities Ltd | Retail Equity Research ITC reported net revenue growth (net of excise duty for the base and current quarter) of 7.6% YoY to | 10,707 crore. Gross numbers for the cigarette segment are not comparable. FMCG, agri business & hotels business witnessed growth of 10.3%, 11.9% and 14.2%, respectively. However, the paperboard segment reported flat sales during the quarter. Cigarette volume increased ~2% after three consecutive quarter of volume de-growth...

ITC's EBITDA/ PAT growth was reasonably healthy at +19.2%/+18.2% YoY, well ahead of our and consensus estimates with significant improvement in performance in cigarettes/ other segments in the aggregate. Strong performance was exhibited by Cigarettes, Agri-business and Paper board. Despite strong performance, ITC is trading at a steep discount to other large FMCG players, which trades at 35x-45X FY20E PER (vs. 25X FY20E PER for ITC)....

Legal cigarette industry reeling under pressure The legitimate cigarette industry in India declined steadily since 2010-11 at a CAGR of 4.8% p.a., however, illegal cigarette volumes have grown at about 5% p.a. during the same period, making India the 4th largest illegal cigarette market in the world. This results in ` 130bn revenue loss to the government each year. While legal cigarettes in India contribute 87% of tax revenue, it constitutes only 11% of tobacco consumption. India is studying the Kenyan model of tracking tobacco products to curb illicit trade that leads to loss of tax revenue. The mechanism...

Legal cigarette industry reeling under pressure The legitimate cigarette industry in India declined steadily since 2010-11 at a CAGR of 4.8% p.a., however, illegal cigarette volumes have grown at about 5% p.a. during the same period, making India the 4th largest illegal cigarette market in the world. This results in ` 130bn revenue loss to the government each year. While legal cigarettes in India contribute 87% of tax revenue, it constitutes only 11% of tobacco consumption. India is studying the Kenyan model of tracking tobacco products to curb illicit trade that leads to loss of tax revenue. The mechanism...

FY18 AR: Government remained the bigger beneficiary The GST Council's (perhaps unintentional?) u-turn on cigarette taxation immediately post GST rollout ensured that government retained a lion's share of ITC's value-addition. Over the past 5 years, 73% of the total value-added by ITC accrued to the government (value-added' defined as the value created by the economic activities of the company and its employees). ITC contributed a cumulative INR 1.5tn (USD 23bn) to the Exchequer over the past 5 years (FY14-18) during which period its own profits were just INR477bn (USD 7.3bn) - share of the government in the value-added by ITC is 3.5x the amount that accrued to the providers of...

Revenue grew by 8.34% to Rs. 10479.24 Cr in Q4FY18 when compared to the previous quarter. ITC Ltd Q4FY18 Result Comment