ITC - Progressing Steadily; Expects Gradual Macro Recovery: Motilal Oswal

Motilal Oswal Report

ITC Ltd.’s core businesses of cigarette and fast moving consumer goods are seeing steady growth. Key monitorables are overall demand recovery, rural recovery and government’s initiatives to drive consumptions.

FMCG continues to enjoy industry leading growth over peers due to ITC’s category presence (large unorganized mix, under-penetrated, etc.). Consistent margin improvement further provides confidence in growth without compromising profitability.

After the demerger of its asset-heavy hotels business, ITC's return profile will also improve. Margin improvements in the other FMCG business will further enhance return ratios and valuation multiples.

Capital efficiency will further improve operating cash flow, leading to a healthy sustainable dividend yield (3-4%).

We reiterate our Buy rating with SOTP-based target price of Rs 500 (implied 27 times FY26E earnings per share).

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