Buy ITC, target price Rs 285: HDFC Securities

HDFC Securities has buy call on ITC with a target price of Rs 285. The current market price of ITC Ltd. is Rs 222.6 Time period given by analyst is one year when ITC Ltd. price can reach defined target. ITC Ltd., incorporated in the year 1910, is a Large Cap company (having a market cap of Rs 273449.64 Crore) operating in Tobacco sector.

ITC Ltd. key Products/Revenue Segments include Packaged Food Item, Agricultural Products, Paper & Paper Boards, Others, Service (Hotel), Tobacco Unmanufactured, Printed Materials, Other Operating Revenue for the year ending 31-Mar-2020.



Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 15313.15 Crore, up 4.26 % from last quarter Total Income of Rs 14687.80 Crore and up 11.53 % from last year same quarter Total Income of Rs 13730.06 Crore. Company reported net profit after tax of Rs 3763.73 Crore in latest quarter.


Investment Rationale
The brokerage models 8% YoY growth in cigarette revenue (-8% in Q3FY21 and +10% in Q2FY22), with a volume growth of 8% YoY (-7% in Q3FY21 and +10% in Q2FY22). Non- Cigarette business is expected to grow 10% YoY (+4% in Q3FY21 and +7% in Q2FY22). We model 11% YoY growth in FMCG (+7% Q3FY21 and +9% in Q2FY22). It expects cigarette EBIT to grow by 10% YoY (-8% in Q3FY21 and +10% in Q2FY22). It models other FMCG EBIT margin at 6.3% (6.4% in Q3FY21 and 6.7% in Q2FY22). It models overall EBITDA margin expansion of 97bps YoY to 34.8% (-459bps in Q3FY21 and +15bps in Q2FY22). EBITDA to grow by 13% YoY (-6% in Q3FY21 and 14% in Q2FY22).

Promoter/FII Holdings
Promoters held 0 per cent stake in the company as of 30-Sep-2021, while FIIs owned 13.59 per cent, DIIs 40.94 per cent.