ITC Ltd. share price target

We have a BUY rating with a TP of Rs 358, based on 32x Dec-19EPS. We see risk reward favoring ITC at current price. At CMP, the implied EPS CAGR (FY17-FY20E) at 30x FY20 P/E (Ex-ITC Sector P/E is at 37x FY20) is ~1% and reflecting higher discounting factored in the stock. ITCs last 5 year EPS CAGR (despite punitive taxes) is 10%. Even during the most challenging quarter i.e. 2QFY18, ITC posted 5.6% growth in APAT. Hence, we believe the stock has immense potential to perform well in the coming years. We expect Revenue/EBITDA/APAT CAGR of 9/10/10% respectively over FY17-20E.

Our recent visits to ITC's e-Choupal and Choupal Saagar facilities in Madhya Pradesh's Sehore district underline the company's ambitious plans to grow its ITC IN Other FMCG' business. Management too, in its recent interviews in the media,...

Comparable cigarette gross sales and EBIT grew 1% and 2% with 6% volume decline. Cigarette volume was hurt due to GST rate pass-through. Other FMCG and paper sales grew 10% and 18%, while agri and hotels posted muted show.

We have BUY rating with a TP of Rs 358, based on 32x Sep-19EPS. ITC net revenues were up 1% YoY at Rs 97.6bn. Like-to-like revenue grew 4% vs. 6% expectation. EBITDA and PAT grew 4% and 6% respectively. Amidst a rise in taxes, cigarette revenue growth was at ~2%, impacted by ~6% volume contraction (5% fall anticipated). The hike in Cigarette prices was ~11%, but an unfavourable product mix (higher share of <65mm Cigarettes) impacted Cigarette revenue growth. Volume pressure was softer in September, and could result in better volume traction in the coming quarters. FMCG at 10% revenue growth (like-to-like) and Paper at 18% EBIT growth were outliers in the Non-cigarette segment. Cigarette business, despite punitive taxes, registered ~10% and ~9% revenue CAGR in the last 10 and 5 years resp. We expect ITC to deliver ~7% CAGR in the Cigarette business over FY17-20E. Non-cigarette business can improve gradually, as most of their demand drivers are in a recovery stage. We expect ~13% sales CAGR over FY17-20E. ITC is a market leader in Cigarettes (~70% market share), notebooks, valued-added paperboards and a critical player in biscuits. The company operates at EBITDA margin of 36%, along with core RoCE of ~40%. We have BUY rating with a TP of Rs 358, based on 32x Sep-19EPS.

ICICI Securities Ltd | Retail Equity Research ITC reported net revenue growth (net of excise duty for base quarter as well as our estimates) of 7.2% YoY to | 10226.4 crore, marginally lower than our estimate of | 10593.8 crore. Amid higher tax incidence under GST, the cigarette business was adversely impacted and reported a volume decline of ~6% YoY, against our estimated decline of ~3% YoY (assuming realisation growth of ~12% YoY to pass on the increase in the tax incidence under GST)...

ITC's 2QFY18 net revenue grew 1.1% YoY (est. of +2.5%) to INR97.6b. EBITDA margin expanded 90bp YoY (est. of +160bp). EBITDA thus grew 3.6% YoY to INR37.6b (est. of +6.6%). Adj. PAT grew 5.6% YoY (est. of +9.5%) to INR26.4b. Cigarette volume is likely to have declined ~6% YoY, higher than our expectation of a 2% fall. We reckon the proportion of sub-65mm cigarette sales to have increased further. For cigarette, revenue declined 2.3% YoY, while EBIT grew 2.3% YoY (320bp expansion of EBIT margin on gross sales). Cigarette EBIT growth was the second weakest in 10 quarters, following a 1.7% increase...

Cigarette sales volume declined by 5-6%; Noncigarette FMCG outperforms: Revenue of the cigarette business grew by 1-2% on comparable basis, as cigarette sales volume declined by 5-6% on account of a substantial increase in tax rate under the GST regime. PBIT grew by 2.3% YoY on account of price hikes undertaken prior/ post GST implementation. Non-cigarette FMCG delivered a strong performance in the tough...

According to media reports, the Health ministry has issued a directive that shops authorized to sell tobacco products will not be permitted to sell any non-tobacco products that are essentially meant for non-tobacco users, especially children.

In-line Q1: Gross sales, EBITDA, and adj. PAT grew 4%, 6%, and 7%. Cigarette gross sales and EBIT grew 7% and 9% with 2% volume growth (vs. street estimate of flat to -2%). Other FMCG and hotel sales grew 9% and 6%, while agri and paper sales growth at -1% and 3% disappointed.