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Strong growth potential and market leadership

ITC Limited is a diversified conglomerate with a presence in multiple portfolios of businesses, including cigarettes, FMCG, hotels, agri-business, and paperboards and packaging. The company holds a dominant position in the Indian cigarette market, contributing significantly to its revenue. ITC has also expanded into various FMCG sectors, offering products like packaged foods, personal care items, and stationery.

Investment Rationale

Strong commitment to ITC Next strategy: ITC is vigorously implementing its ITC Next strategy to shape future growth and profitability. The extensive strategy reset unleashes new drivers of structural competitiveness by strengthening the multiple drivers of growth, innovation and R&D, building agile, resilient and efficient Supply Chains, mainstreaming digital adoption, sustainability, and ensuring cost optimisation. The ITC Next strategy focuses on exploring opportunities to craft disruptive business models anchored at the intersection of the mega trends of digital and sustainability, while leveraging the Company's institutional strengths.

Strategic growth and diversification: ITC actively pursues growth by fortifying its core businesses, exploring value-added adjacencies, and scaling up new growth vectors. This multi-pronged approach is evident in recent launches spanning diverse categories, including snacks, staples, dairy, and personal care. Furthermore, the company leverages strategic investments to enhance its distribution infrastructure and penetrate new markets. ITC's commitment to diversification mitigates risk by reducing reliance on any single sector, offering investors exposure to a range of growth opportunities.

Strong brand portfolio and market presence: ITC possesses a portfolio of over 25 world-class Indian brands, built through an organic growth strategy and reaching over 250 million households in India. The company's strong brand equity, particularly in the FMCG sector, coupled with its extensive distribution network, provides a competitive advantage in capturing market share. This brand strength translates into a loyal customer base and sustained revenue generation, reinforcing ITC's position as a market leader in various segments

Outlook & Valuation

ITC Limited stands as a diversified leader in India, excelling in cigarettes, FMCG, hotels, agri-business, and paperboards. Its ITC Next strategy drives future growth through innovation, agile supply chains, and sustainability initiatives. By launching new products across various categories and enhancing distribution, ITC is fortifying its core businesses. With a strong portfolio of brands and an extensive market presence, ITC mitigates risks through diversification while leveraging brand equity to capture market share, ensuring sustained revenue and reinforcing its leadership position. On the financial front, we have estimated its revenue/EBITDA/PAT to grow at 12.7%/13.5%/13.8% CAGR over FY24-26E. Thus, maintaining our Buy rating and a target price of Rs 594.

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SEBI Registration number is INZ000174330