ITC Ltd. share price target

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%).

With an upside potential of 13% from the CMP, we maintain our BUY rating on the stock.

Recommendation With an upside potential of 11% from the CMP, we maintain our BUY rating on the stock.

Cigarette business had a soft quarter while FMCG-others remained resilient, and hotels posted its best quarter on a high base

Management is guiding for 80-100bps EBITDA margin expansion every year from cost cuts, scale and premiumisation

We estimate the company to post Revenue/EBITDA/PAT growth of 10%/12%/12% CAGR over FY23-26E and maintain a BUY rating on the stock with an unchanged TP of Rs 540/share. We value the company at 27x June-25 EPS. The TP implies an upside of 20% from the CMP.

Cigarette business continues to report steady revenue growth (+10% YoY; 17% 2Y CAGR), while cigarettes volume growth of ~4-5% is tad below our estimates. Market share gains from the informal segment continue due to (1) stability in taxes and (2) deterrent action by enforcement agencies. We expect volume growth for the formal industry to remain healthy in FY24.

Recommendation With an upside potential of 20% from the CMP, we maintain our BUY rating on the stock.

Cigarettes business delivered sustained volume growth in Q1 at ~10% YoY; innovation remains in focus