KR Choksey's research report on ITC
For Q2FY23, ITC reported consolidated operating revenue of INR 1,86,080 mn (+25.4% YoY/ -6.2% QoQ). For H1FY23, ITC’s revenue increased by 32.2% YoY to INR 3,84,393 mn. ITC’s EBITDA for Q2FY23 was INR 62,591 mn (+24.7% YoY/ +3.0% QoQ). EBITDA margin for the quarter was at 33.6%, which declined by 16 bps YoY while improving by 299 bps QoQ. For H1FY23, EBITDA margin contracted by 44 bps YoY to 32.1%. In Q2FY23, PAT improved by 24.4% YoY and 5.2% QoQ to INR 46,198 mn. PAT margin for Q2FY23 was at 24.8% (-19 bps YoY/ +269 bps QoQ). For H1FY23, PAT increased by 28.9% YoY to INR 90,095 mn, while PAT margin declined by 60 bps YoY.
Outlook
We value ITC shares using the SOTP approach applying 12.6x EV/EBITDA (unchanged) on the FY24E EBITDA of Cigarette business; 21.0x EV/EBITDA (previously 18.9x) on the FY24E EBITDA of Hotels business; 8.6x EV/EBITDA (unchanged) on FY24E EBITDA of Agri business; 6.0x EV/EBITDA (unchanged) on FY24E EBITDA of Paper business and 8.8x EV/Revenue (previously 8.0x) on FY24E Revenue of FMCG business – we increase our target price to INR 400 per share (previously INR 369); an upside of 15.5% over the CMP. Accordingly, we maintain our “BUY” rating on ITC Ltd shares.
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