Target: ₹540

CMP: ₹441.90

ITC reported a stable 1QFY24 with revenue (ex-Agri business) growing 10.6 per cent y-y and EBITDA rising 10.7 per cent, supported by solid contributions from both Cigarette and FMCG divisions. Revenue missed BNPP expectations due to lower y-y sales of the Agri-division, while EBITDA missed by 2.9 per cent on the Paperboard division’s lower profitability.

However, other income was higher than BNPPe and PAT beat our estimate by 2 per cent. The Agri business was hurt by the wheat export ban, excluding which sales rose 31 per cent y-y. The Cigarette division’s net sales grew 11 per cent y-y, driven by 8 per cent volume growth.

ITC has approved the Hotel business’ demerger into ITC Hotels. As of FY23, Hotels contributed c3.7% to ITC’s total standalone turnover. While ITC Hotels will operate independently, it will continue to leverage the company’s institutional strengths, solid brand equity and goodwill.

ITC results were largely in line with our estimates and we retain our estimates and TP. ITC trades at 23x FY24E P/E and offers an attractive dividend yield. As such, we find the valuation still reasonable and ITC continues to be our top pick in FMCG.