JM Financial maintains Buy on ITC, lowers target price to Rs 500

JM Financial has maintained a Buy call on ITC with a revised target price of Rs 500 (earlier Rs 515). The current market price of ITC is Rs 436.3. The time period given by the analyst is a year when ITC price can reach defined target. ITC, incorporated in 1910, is a Large Cap company with a market cap of Rs 545991.05 crore, operating in the Tobacco sector.

ITC's key products/revenue segments include Packaged Food Item, Paper & Paper Boards, Agricultural Products, Others, Service (Hotel), Tobacco Unmanufactured, Printed Materials, Other Operating Revenue for the year ending 31-Mar-2024.

Financials
For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 19405.26 crore, up .10 % from last quarter Total Income of Rs 19386.03 crore and up 4.29% from last year same quarter Total Income of Rs 18606.53 crore. The company has reported net profit after tax of Rs 19709.47 crore in the latest quarter.

The company?s top management includes Mr.Sanjiv Puri, Mr.Atul Singh, Mr.Alka Marezban Bharucha, Mr.Hemant Bhargava, Ms.Nirupama Rao, Ms.Meera Shankar, Mr.Arun Duggal, Mr.Shilabhadra Banerjee, Mr.Anand Nayak, Mr.Sunil Panray, Mr.Shyamal Mukherjee, Mr.Mukesh Gupta, Mr.Ajit Kumar Seth, Mr.Supratim Dutta, Mr.Sumant Bhargavan, Mr.Hemant Malik, Mr.Pushpa Subrahmanyam. Company has S R B C & Co. LLP as its auditors. As on 31-03-2025, the company has a total of 1,251 crore shares outstanding.

Investment Rationale
ITC?s Mar-Q performance was largely inline both on segmental revenue and profitability. Cigarette net sales grew by 6% led by volume growth of c.5% (similar to Q3) and balance due to mix as no pricing actions were taken by the company. Steady volumes indicate that category remains relatively resilient vs other consumption segments. However, raw material price inflation and lack of price hikes resulted in EBIT growth being lower at c.4%. While tobacco prices have moderated, benefit of the same is likely to be seen in 2H as high cost inventory gets consumed in 1H. FMCG business (sales growth of 5.4% ex Notebooks) remained subdued (growths were weaker than peers like TCPL, Britannia, but better than Nestle) impacted by muted demand conditions and high regional competition in certain categories. High input cost and increased marketing spends led to 214bps YoY decline in EBITDA margins. Among the cyclical businesses ? Agri business performed well while Paperboards performance remained under pressure. Resilient volume growth & taxation stability in Cigarettes is positive; acceleration in EBIT growth will be key monitorable. Similarly, pace of recovery in FMCG needs to be watched due to heightened competitive scenario in Foods. With demerger of Hotels business, the capex intensity will reduce & aid improvement in ROIC. Valuations at 25x/23x FY26/27E are not demanding. JM Financial maintains BUY with revised target price of Rs 500 (26x June?27 EPS).