MUMBAI - Motilal Oswal has maintained a 'buy' on ITC for a target price of Rs 242, an upside of 14 per cent to the market price of Rs 213 considered by the brokerage.
ITC reported sales of Rs 3,460 crore in October-December quarter of 2007 as against the brokerage's estimate of Rs 3,580 crore. Profit after tax was Rs 830 crore against the estimated Rs 797 crore. Other income increased from Rs 69.8 crore to Rs 137.4 crore, led by higher yield on treasury investments in debt instruments.
Cigarette volumes de-grew 1 per cent year on year, which was better than Motilal Oswal's estimate of a 2 per cent decline in growth. Gross sales of cigarette business grew 7.6 per cent and profit before interest and tax grew 16 per cent as margins expanded 190 basis points, the brokerage says in its report dated Jan 18.
Motilal has reduced 2007-08 volume de-growth estimates from 3 per cent to 2 per cent, which indicates flat volumes in January-March quarter. Imposition of value added tax in Uttar Pradesh will reduce state tax on cigarettes from 33 per cent to 12.5 per cent, which will boost the profitability from January-December.
Paper and paperboards business reported 11.2 per cent increase in sales and 13.6 per cent in profit before interest and tax as margins expanded 40 basis points.
ITC is commissioning 1,20,000 tonne per annum pulp capacity in January-March, 1,00000 tpa writing and paper facility in April-June quarter of 2008-09 and 90,000tpa paperboard capacity in July-September of 2008-09.
The pulp plant will increase margins as production cost is expected to be 30-35 per cent lower than the imported hard wood pulp prices, Motilal says. New FMCG accelerated sales growth to 50 per cent while profit before interest and tax losses increased 38.7 per cent.
Foods business grew 60 per cent as Bingo attained over 16 per cent market share in major metros while Sunfeast biscuits increased market share to 11.8 per cent. Personal care products under Fiama Di Wills and Superia brands received good initial response.
Motilal Oswal has increased other income estimate from Rs 480 crore to Rs 540 crore. The brokerage has also increased FY08, FY09 and FY10 EPS estimates to Rs 8.3, Rs 9.8 and Rs 11.5 from Rs 8.2, Rs 9.5 and Rs 11.4, respectively. The stock trades at 19x FY10E earnings at the considered market price. On BSE Thursday, ITC shares closed down 2.08 per cent at Rs 188.50.
ITC reported sales of Rs 3,460 crore in October-December quarter of 2007 as against the brokerage's estimate of Rs 3,580 crore. Profit after tax was Rs 830 crore against the estimated Rs 797 crore. Other income increased from Rs 69.8 crore to Rs 137.4 crore, led by higher yield on treasury investments in debt instruments.
Cigarette volumes de-grew 1 per cent year on year, which was better than Motilal Oswal's estimate of a 2 per cent decline in growth. Gross sales of cigarette business grew 7.6 per cent and profit before interest and tax grew 16 per cent as margins expanded 190 basis points, the brokerage says in its report dated Jan 18.
Motilal has reduced 2007-08 volume de-growth estimates from 3 per cent to 2 per cent, which indicates flat volumes in January-March quarter. Imposition of value added tax in Uttar Pradesh will reduce state tax on cigarettes from 33 per cent to 12.5 per cent, which will boost the profitability from January-December.
Paper and paperboards business reported 11.2 per cent increase in sales and 13.6 per cent in profit before interest and tax as margins expanded 40 basis points.
ITC is commissioning 1,20,000 tonne per annum pulp capacity in January-March, 1,00000 tpa writing and paper facility in April-June quarter of 2008-09 and 90,000tpa paperboard capacity in July-September of 2008-09.
The pulp plant will increase margins as production cost is expected to be 30-35 per cent lower than the imported hard wood pulp prices, Motilal says. New FMCG accelerated sales growth to 50 per cent while profit before interest and tax losses increased 38.7 per cent.
Foods business grew 60 per cent as Bingo attained over 16 per cent market share in major metros while Sunfeast biscuits increased market share to 11.8 per cent. Personal care products under Fiama Di Wills and Superia brands received good initial response.
Motilal Oswal has increased other income estimate from Rs 480 crore to Rs 540 crore. The brokerage has also increased FY08, FY09 and FY10 EPS estimates to Rs 8.3, Rs 9.8 and Rs 11.5 from Rs 8.2, Rs 9.5 and Rs 11.4, respectively. The stock trades at 19x FY10E earnings at the considered market price. On BSE Thursday, ITC shares closed down 2.08 per cent at Rs 188.50.
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