Angel Broking recommends Buy on ITC with a Target Price of Rs 382 over 12 months

For 3QFY2014 ITC's performance was in-line with our estimates. Its bottomline rose by 16.3% yoy to Rs. 2,385cr. Although, cigarette volumes declined by ~2-3% yoy, the EBIT of the division rose by 18.8% yoy.

Key highlights: ITC's net sales rose by 13.1% yoy to Rs. 8,623cr. The Cigarettes business posted a 12.5% yoy growth in net sales to Rs. 4,116cr, aided by the price hikes taken by the company, even though volumes are expected to have de-grown by 2-3%. Healthy realizations resulted in the Cigarettes business posting an 18.8% yoy growth in its EBIT. The non-cigarette FMCG business posted a 16.6% yoy growth in net sales to Rs. 2,078cr aided by a robust performance from the branded packaged foods business. Enhanced scale and improvement in leverage resulted in segmental EBIT of Rs. 10cr vs a loss of Rs. 24cr for 3QFY2013. The Agri business posted a 9.5% yoy and 19% yoy growth in revenue and segmental EBIT respectively. The Paperboards and Packaging division's revenue grew by 18.5% yoy. However, segmental EBIT remained flat on account of increase in input costs. The Hotels business posted a flat performance on the top-line front, reporting a net revenue of Rs. 315cr. Overall, the company's OPM rose by 54bp yoy to 36.9%.

Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 14.0% and 17.2% respectively over FY2013-15E. At the current market price, the stock is trading at 25.2x FY2015E EPS. We recommend a Buy on the stock with a Target Price of Rs. 382.

Source : Equity Bulls

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