Buy ITC, target price Rs 575: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on ITC with a target price of Rs 575. The current market price of ITC is Rs 482. ITC, incorporated in 1910, is a largecap company with a market cap of Rs 601990.73 crore, operating in Tobacco sector.

ITC's key products/revenue segments include packaged food item, paper & paper boards, agricultural products, service (hotel), tobacco unmanufactured, printed materials, other operating revenue for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a consolidated total income of Rs 22897.85 crore, up 19.56% from last quarter's total income of Rs 19152.21 crore, up 24.18% from last year same quarter's total income of Rs 18439.35 crore. The company has reported net profit after tax of Rs 5046.32 crore in the latest quarter.

Investment Rationale
Molital Oswal Financial Services says that there are no material changes to their EPS estimates for FY25 and FY26. ITC's core businesses of cigarette and FMCG are seeing steady growth. FMCG continues to enjoy industry-leading growth over peers due to ITC's category presence (large unorganized mix, under-penetrated, etc.). After the demerger of its asset-heavy hotel business, ITC's return profile will also improve. Capital efficiency will further improve operating cash flow, leading to a healthy sustainable dividend yield (3-4%). With the stable tax on cigarettes, the brokerage anticipates sustainable growth in business and value it at 20x Sep?26E EV/EBITDA. Motilal Oswal reiterates the BUY rating with SOTP-based target price of Rs 575 (implied 30x Sep?26E EPS).