CLSA expects over 10% upside in ITC; reiterates as top pick

NEW DELHI: CLSA has maintained 'outperform' rating on ITC and reiterated it as top pick, the global brokerage firm said in a note. It has set price target of Rs 330, hence expecting over 10 per cent upside potential.

At 09:40 am, ITC was trading 0.1 per cent higher at Rs 287.40. It has hit a low of Rs 286.35 and a high of Rs 290.25 in trade today.

Earlier in the month of April, the country’s largest cigarette maker has raised prices of its cigarettes 14-18%, in line with market expectations.

CLSA is building 19 per cent increase in realization in FY14 and expects further price hikes in the coming months.

Given slowdown in consumption categories, CLSA said, ITC offers the best earnings visibility in the sector.

For the upcoming earning season for the January-March quarter, analysts expect the FMCG major to report a 17 per cent sales growth, led by 13 per cent net sales growth in cigarettes and 27 per cent growth in FMCG sales.

“The steep price increases will keep volumes subdued and we expect a 1 per cent volume growth for the quarter. Overall PAT growth is expected at 19 per cent,” IDFC said in a report.

According to Sharekhan, ITC is expected to report a decent bottom line growth of about 17.2 per cent YoY respectively (driven by an improvement in the margins and an increase in the other income).

The brokerage firm has maintained ITC as their top pick in the large-cap FMCG space in view of its strong balance sheet and the decent upside potential of its stock from the current levels.