Buy ITC - Karvy

ITC: (CMP: Rs. 288; Target Price: Rs. 312) - BUY

ITC's dominance on cigarette would continue going forward, owing to extensive portfolio, large distribution network, and suitable backward integration. We expect strong pricing power and likely foray into 64 mm cigarette segment would aid ITC in maintaining healthy growth momentum. Besides, better cigarette revenue mix with pricing power, higher operational efficiency would boost PBIT/stick to 109 paisa by FY15E from 80 paisa in FY12P.

Outlook & Valuation: Valuing the stock using DCF methodology - as relative valuation is not feasible in the lack of suitable comparison - we initiate coverage on ITC with "BUY" recommendation with a target price of Rs. 312 apiece, having 8% upside potential from the CMP.

Source : Equity Bulls

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