Target: ₹500
CMP: ₹433.65
We met with the top management team of ITC, represented by Supratim Dutta – Executive Director & CFO, to discuss the industry outlook, growth prospects for its business verticals, profitability outlook, and other focus areas. Here are the key takeaways from the discussion:
The company is looking to grow beyond macro recovery by implementing new initiatives and expanding its product portfolio. Cigarette business has recovered well post Covid (now at 97-98 per cent of peak cigarette volume in FY13). Steady macro and government initiatives (stable taxes, control over illegal cigarette, etc.) are expected to further help ITC to sustain volume growth.
The management is hopeful for positive steps by the government in the upcoming budget, which should boost consumption expenditure. In the backdrop of steady macros and taxes, we estimate that the company can achieve low to mid-single digit cigarette volume growth with mid to high single-digit EBIT growth in the medium term.
In the medium term, the growth outlook is positive for the FMGC business. Its paper business is seeing weakness (revenue and margin) and agri business remains volatile due to curbs on agri commodity trading (Govt. regulations). The Union Budget will be a key monitorable for taxes on cigarette business and overall initiatives for consumption boost. We reiterate our Buy rating with SOTP-based TP of ₹500.