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Motilal Oswal Report
ITC Ltd.'s sales growth momentum was better than expected across businesses in Q1 FY23. Barring the agri business, where the ban on wheat exports may result in relatively muted growth in subsequent quarters, momentum in other businesses is expected to remain robust.
As highlighted in our FY22 annual report note, strong earnings momentum (16% earnings per share compound annual growth rate over FY22-24 versus ~5% in the preceding five years) is being led by good performance from cigarettes in a stable tax environment, healthy recovery in profitability for the hotels business, and continued good performance from fast moving consumer goods-others.
Unlike peers, pressure on material costs is far lower. Allied with better capital allocation and continued healthy dividend payout, the path towards high 20s or early 30s return on equity is visible.
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