Maintain 'buy' on ITC - TP Rs.260 - Geojit BNP Paribas Financial Services Limited

- Buy rating on ITC is maintained with a target price of Rs.260 over one year.

- Despite increased challenges for both cigarette and non-cigarette businesses, ITC is expected to deliver 19% CAGR in earnings over FY13-14. This is about 200 bps above the average for the past five years.

- This growth rate is expected by steady performance of the cigarette business and turnaround of the FMCG business.

- Despite steep price hike for cigarettes due to significant increase in excise duty, demand for premium filter cigarettes has been resilient on account of calibrated price increases and low price elasticity.

- Pricing trend for cigarette business is encouraging and implies margin expansion of 150-200 bps for FY13-14.

- The target price of Rs.260 is on the basis of FY14 expected earnings and in line with its historical average P/E multiple of 22.

Source : Equity Bulls

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