ITC Q3 Results Review - Disappointing Volume Performance; Reduce: Dolat Capital

Dolat Capital Report

ITC Ltd.'s Q3 FY24 revenue and adjusted profit after tax came in line. Our analysis suggest that the cigarette business reported flat volume growth– below our estimate.

ITC's fast moving consumer good business reported 7.6% revenue growth with 110bps improvement in Ebit margin. Revenue performance was better compared to the industry.

Cigarette business is battling high base and is expected to post muted performance hence forth. The business reported 9% sales compound annual growth rate and 5.1% volume CAGR over last four-years. We expect volume and MS gain in the business in the near term.

We have downward revised our FY24/25/26E EPS estimates by 2.7/2.1/1.3% at Rs 16.3/18.0/19.8 to factor in Q3 performance and increased pressure in cigarette and paper business.

We have arrived at a target price of Rs 464 (SOTP valuation). Considering recent run-up in stock price. We downgrade to Reduce.

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