ITC Ltd. share price target

ITC's Q2FY19 results came marginally ahead of our expectations. The cigarette business posted ~6% volume growth which was marginally better than estimate of 5%. The company reported strong 12.7% jump in FMCG business. Further, a 12.8% revenue growth in Agri businesses was encouraging as the business reported growth in the second consecutive quarter after lackluster performance in prior four quarters. Volume growth in cigarette business is continuously improving, which is a key positive. Going ahead, we believe that the volume growth would continue to...

The GST Council is scheduled to meet coming Friday, Sep 28 to, inter alia, decide on a way to raise funds to help re-build Kerala after the state faced massive losses from severe flooding last month (Aug'18). The natural consequence of this is, expectedly, renewed pressure on ITC's share price. Interestingly, the GST Council may not need any parliamentary approval for this additional levy since Article 279A of the Constitution has already been amended to allow the GST Council to recommend any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster'. We expect the stock to recover once the event is out of the way this week, as we do not expect the fresh levy to be all that...

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...