ITC Q4 Results Review - Strong Momentum Continues: Prabhudas Lilladher

Prabhudas Lilladher Report

We increase our FY24/FY25 earnings per share of ITC Ltd. by 1.6%/1.4% as we roll over to FY25. Cigarette volume growth for Q4 was 12% supported by broad based premiumisation in longs and king size cigarettes. Near term looks favorable with expectations of mid-single digit volume growth. Although fast moving consumer goods margins got a boost due to production linked incentive and state incentives, FY24 should gain from benign input costs.

Hotel outlook is positive due to G20 and revival in business and foreign tourist travel. Paper and paperboard segment was impacted due to weakness in market coupled with expansion related shutdowns, expect margins to recover from Q4 levels.

While near term outlook is strong, we estimate 10.7% EPS compound annual growth rate over FY23- 25. ITC has scope to increase cigarette profitability as current Ebitda margins are 5% lower than peak margins. ITC trades at 22.8 times FY25 EPS with return on equity/return on capital employed of 30% plus/35% plus and ~80% plus dividend payout.

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