ITC Sees Target Upgrade As Antique Stock Broking Bullish On Staples And Cigarettes Business

Antique Stock Broking Ltd. has raised its target price on ITC Ltd. to Rs 563, maintaining a 'buy' rating, citing the company's resilience in a challenging consumer environment. The brokerage highlighted ITC’s strategy of offering cigarettes at various price points, which has helped it counter aggressive competition, and its premium FMCG portfolio across food and personal care, which is expected to outperform consumer staple peers.  

However, Antique Stock Broking warned that steep inflation in raw material prices could weigh on profit margins for both cigarettes and FMCG segments.  

The brokerage expects ITC's cigarette business to deliver a 3% year-on-year volume growth and a 6% value growth in the December quarter, driven by product innovation and launches like Classic Icon, Gold Flake Indie Mint, and American Club variants. Over fiscal year 2024-2027, cigarette volume and value are projected to grow at a compounded annual growth rate of 3% and 6%, respectively.  

In the FMCG segment, branded wheat flour and the premium portfolio are expected to support growth, though margins may remain under pressure in the near term due to rising costs of raw materials like wheat and vegetable oil. The brokerage anticipates the Rabi harvest season in the fourth quarter of fiscal 2025 to ease commodity inflation, helping ITC achieve an 11% revenue CAGR in FMCG over FY24-FY27.  

The hotels and agri businesses are likely to sustain strong growth, with hotels expected to deliver double-digit sales growth on a high base. Antique Stock Broking revised its Ebitda estimates for ITC’s hotel division upward by 10%-31% for fiscal year 2025-2027, citing buoyancy in the industry. Meanwhile, the agri segment is projected to see healthy revenue growth, driven by exports of rice, leaf tobacco, and value-added spices.  

However, ITC’s paper business may continue to face short-term challenges due to dumping by Chinese manufacturers and elevated domestic wood prices, the brokerage noted.

Antique Stock Broking believes ITC’s diversified portfolio and strong performance across cigarettes, FMCG, and hotels make the recent correction in its stock price a good entry point for investors. The brokerage’s target price of Rs 563 is based on a sum-of-the-parts valuation for fiscal 2027, implying a price-to-earnings ratio of 26 times.