ITC Q2 Review - Mixed Bag; Sales Growth Should Improve From Q3 As Export Ban Comes Into Base: Yes Securities

Yes Securities Report

ITC Ltd.'s Q2 FY24 revenues were in-line but margins came in lower than our estimate. Within business segments, while cigarette business was in-line, fmcg, others, agri business and paperboards, paper and packaging missed our estimate.

The underperformance in these segments was offset by lower excise duty and inter-segmental sales versus our expectation for the quarter. Paperboards, paper and packaging also sharply disappointed on margins largely led by subdued demand, sharp reduction in global pulp prices and high base effect.

As export ban comes into base, normalised agri business growth should lead to better overall revenue growth in H2 FY24 for ITC.

We now introduce FY26 estimates and but build a relatively subdued 10% earnings per share compound annual growth rate led by 7.2% revenue CAGR over FY23-FY26E.

Rolling forward to September-25, we get a revised target price of Rs 500, maintaining our 'Add' rating.

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