By Markets Desk | September 18, 2024
The analysts at the domestic brokerage Sharekhan are bullish on diversified entity ITC Ltd, retaining their 'BUY' call on the stock.
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The analysts at the brokerage expect ITC’s FMCG business to clock a CAGR of 15% over FY2024-27. The non-cigarette FMCG business has a strong potential to grow by low to mid-teens with EBITDA margins improving by 80-100 bps per annum in near term.
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The brokerage has retained its buy call, recommending a share price target of Rs 595 per share, an upside potential of about 16 percent.
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With the tax rate on cigarettes kept unchanged in the Union Budget, ITC’s cigarette business is expected to achieve steady volume growth in the quarters ahead, the report noted.
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The company expects demand to recover prior to festive season in ITC's paperboard, paper & packaging (PPP) business. Recovery in the business and low base will help the PPP business to achieve strong growth in FY2025, it said.
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The report said that it expect ITC’s earnings to grow in double digits over the next two years. "Its valuations at 24x/22x its FY2026E and FY2027E earnings is at a discount as compared to large peers," it said.
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Any substantial increase in the tax rate on cigarettes by the government or slowdown in the consumer demand likely to act as a key risk to the earnings estimates in the near term, the Sharekhan report said.
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