Buy ITC Ltd For Target Rs. 500 by Motilal Oswal Financial Services Ltd
* Cigarette business is expected to show stable volumes and pricing, with the portfolio continuing to grow, aided by improvements in the product mix. We model 6% volume growth in the business in 2QFY26.
* We expect 7.5% YoY sales growth in cigarette business and 5.5% YoY sales growth in FMCG business.
* We expect 5% YoY growth in cigarette EBIT, though margins may contract by 100bp due to rising leaf tobacco prices. In the FMCG business, we expect a 9% decline in EBIT, with a 100bp margin contraction as price hikes lag behind RM inflation.
* The paper segment remained weak given the influx of cheap Chinese paper.
* The agriculture segment performed well during the quarter.
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