Target: ₹332

CMP: ₹309.65

Gross revenue grew by 39.3 per cent year-on-year to ₹19,831 crore on the back of strong growth across all segments. Though gross profit/EBITDA/PAT saw a growth of 33.6 per cent/36.8 per cent/33.7 per cent, margins reported a decline of 242 basis points/68 basis points/106 bps due to inflationary pressure.

The company’s efforts towards premiumisation and innovation led to post strong numbers with revenue and EBIT growth of 29 per cent year-on-year each. Going ahead, its focus on product portfolio by innovating differentiated variants will continue and stability in taxes will help recovery in volumes of legal cigarettes as well as aid margins trajectory.

FMCG business grew 19 per cent year-on-year to ₹4,458 crore on the back of high demand for discretionary products as well as staples and convenience foods. Further, high input cost impacted margin, but ITC took steps such as price hikes, premiumisation, optimising cost and managing supply chain which helped in protecting margins to certain extent. The next leg of growth for FMCG will be led by ITC’s focus on product mix, go-to-market strategy and increasing focus on direct-to-consumer platform, while prices of key input cost will be key monitorable, going ahead. Hotels witnessed strong growth, driven by pick-up in demand and increase in occupancy post re-opening. Agri business saw a revenue growth of 82 per year-on-year driven by exports of wheat, rice and tobacco leaf.

We are positive on the long-term prospects of ITC, given its strong focus on innovation and premiumisation in cigarettes and FMCG businesses. Also, revival and growth across segments such as hotel, paperboards and agri will continue to aid sentiments. In addition, high dividend payout, debt-free status and strong free cash flow generation as compared to its peers make it one of the preferred picks in the sector.

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