Angel Broking recommends Accumulate on ITC with a 12 months Target Price of Rs. 382

For 4QFY2014, ITC's performance was in-line with our estimates on the bottomline front, with the Cigarettes business posting a strong 20.8% yoy growth in EBIT. The company's other FMCG business turned profitable for the first time on an annual basis in FY2014.

Key highlights: ITC's net sales rose by 11.8% yoy to Rs. 9,145cr. The Cigarettes business posted a 12.6% yoy growth in net sales to Rs. 4,079cr, aided by price hikes, even as volumes are expected to have de-grown by ~2%. Healthy realizations resulted in the Cigarettes business posting a 20.8% yoy growth in its EBIT. The other FMCG business, which posted a 13.7% yoy growth in net sales to Rs. 2,316cr, posted an EBIT of Rs. 43cr. The Agri business posted an 8.1% yoy and 14.1% yoy growth in revenue and segmental EBIT respectively. Although the Paperboards and Packaging division posted a 19.3% yoy growth in revenue, the segment's EBIT remained flat on a yoy basis, impacted by steep increase in wood, coal and chemical costs. While the Hotels business posted a flat performance on the top-line front, its EBIT rose by 47.3% yoy. Overall, the company's OPM rose by 187bp yoy to 34%, aided by higher gross margins (up 106bp yoy) and lower other expenses as a % of sales.

Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 15.2% and 13.9% respectively over FY2014-16E. At the current market price, the stock is trading at 23.4x FY2016E EPS. We recommend an Accumulate on the stock with a target price of Rs. 382.

Shares of ITC LTD. was last trading in BSE at Rs.336.95 as compared to the previous close of Rs. 333.4. The total number of shares traded during the day was 906267 in over 11590 trades.

The stock hit an intraday high of Rs. 338.7 and intraday low of 333.4. The net turnover during the day was Rs. 304670936.

Source : Equity Bulls

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