Diwali Picks 2024 : ITC Ltd For Target Rs.530.0 By Way2Wealth
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* Established in 1910, ITC is the largest cigarette manufacturer and seller in the country. TC has evolved from a pure tobacco company into a welldiversified business conglomerate, with a strong presence in paperboards, printing and packaging, agricultural commodities, hotels, branded packaged foods, personal care products, stationery, safety matches, agarbatti (incense sticks) and other FMCGs. It has also added chocolates, ghee, dairy and frozen food products to its branded packaged foods segment.
* ITC has delivered resilient performance amidst a challenging operating environment. Gross Revenue records strong growth; up 16% YoY driven by robust Agri Business growth of ~47% YoY and Hotels business growth of ~17% YoY. Cigarettes Net Segment Revenue up 7.3% YoY, Segment PBIT up 5.1% YoY. Severe cost escalation in leaf tobacco partially mitigated through improved mix, strategic cost management and calibrated pricing actions. The company’s digitally powered eB2B platform, the UNNATI app, now available in several vernacular languages, covers nearly 0.7mn outlets.
* ITC Ltd, currently in the process of demerging its hotels business, and board has approved consolidation of its shareholding in rival hospitality chains Oberoi and Leela by acquiring shares from a wholly-owned arm, Russell Credit Ltd. The board approved the acquisition of 1.52 crore equity shares of `2 each of EIH Ltd (EIH) and 34.60 lakh equity shares of `2 each of HLV Ltd (HLV), from Russell Credit Ltd (RCL), a wholly-owned subsidiary of the company, at their respective book value.
* Expectations of a good crop output, anticipated moderation in inflation, improving agri terms of trade, and the Government's thrust on public infrastructure & the rural sector augur well for a pick-up in consumption demand.
* At the current price of `482.3, it is trading at a P/E 25 to FY26EPS of `19.1. We remain positive on ITC’s performance and investors should use the recent correction as an opportunity to buy the stock for the long term.
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