Result Update: ITC Ltd - BUY - TP Rs.306 - Kotak

ITC reported weak 2QFY18 results as cigarette business profits disappointed (weaker than expected volume growth in cigarettes). Our EPS estimates are revised marginally (1%) downward. Cigarette volumes have come in weaker than estimates; however, we continue to believe that volume growth will stabilize in the coming quarters. We continue to be voataries for greater convergence between valuation of ITC (26X FY19E PER) and other large cap FMCG companies (30-45X FY19E PER), especially given relatively higher visibility in ITC earnings - ITC's cigarette business has high gross margins, which insulate earnings from raw material price rise. Further, owing to 8% decline in the stock since our last update, our revised price target (Rs 306, down from Rs 318 earlier) offers a healthy 13% upside (excluding c. 2% dividend yield). While risks from regulation remain, we believe the risk-reward is now attractive enough (post further correction in the stock) for entry. We upgrade ITC to BUY (ACCUMULATE earlier)

Shares of ITC LTD. was last trading in BSE at Rs.266.1 as compared to the previous close of Rs. 265.15. The total number of shares traded during the day was 417648 in over 4082 trades.

The stock hit an intraday high of Rs. 268 and intraday low of 264.2. The net turnover during the day was Rs. 110776469.

Source : Equity Bulls

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