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Prabhudas Lilladher Report
ITC Ltd.’s Investor meet highlighted growth imperative led by broad based growth across business segments enabled by- Innovation, efficient and agile supply chain, digital/ smart ecosystem and cost optimisation.
ITC continues to innovate and improve go-to-market initiatives even as cigarette business growth seems to be a function of taxation policy.
ITC is aiming for 80-100 basis points margin expansion in new fmcg business led by premiumisation, scale and cost optimisation. Hotels business is in for strong growth with huge scope to grow and rising average room rate/occupancy.
We found food tech and Nicotine derivative exports as two exciting businesses with a scope to create strong moats in long term. We continue to believe that fmcg and IT services will create huge value for shareholders over the years.
We remain positive innovation and digitization led strategy with sustained growth and 100% jump in return on capital employed of non-cigarette businesses and overall Rs 947 billion cash generation in last 10 years.
ITC trades at 24.9/22.9 times FY25/FY26 earnings per share with ~3% dividend yield and 9.7% EPS CAGR over FY23-26.
Maintain 'Accumulate' with SOTP based target price of Rs 492.
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Also Read: ITC - Leveraging Institutional Strengths To Build Multiple New Growth Engines: Systematix
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