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Anand Rathi
ITC (Buy)
CMP: ₹207.85
Target: ₹306
ITC has reported a growth of 5.8 per cent in its consolidated revenue at ₹13,307.5 crore in Q3-FY20 as against ₹12,583.8 crore million in Q3-FY19. Revenue growth was driven by broad based growth across all the segments with cigarettes, FMCG, hotel, agri and paper businesses registering a growth of 5.3 per cent, 3.5 per cent, 21.1 per cent, 10.4 per cent and 0.8 per cent, respectively. Cigarettes business registered a volume growth of about 2 per cent after factoring in the price hike taken in this segment.
On profitability front, the company’s operating margins have improved by about 80 basis points to 37.4 per cent at ₹49,767 million in Q3-FY20 as against 36.6 per cent at ₹46,053 million in Q3-FY19. The margins were aided by cigarettes business on account of localisation of capsule filters (capsule filters are imported) and price hikes in select portfolio taken recently.
With strong operating cash flows, continuous capacity expansions across businesses and a healthy balance sheet, we continue to remain positive on the company over medium to longer term perspective and maintain our ‘buy’ rating on the stock with a revised target price of ₹306 a share.
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