ICICI Securities has given an “add” call on ITC with a target price of Rs 500. The current market price of ITC is Rs 439.3. Here are some key details and the investment rationale:
Company Profile:
- ITC is a Large Cap company in the Tobacco sector, with a market cap of Rs 548,580.52 Crore.
- Its key products/revenue segments include Packaged Food Item, Agricultural Products, Paper & Paper Boards, Others, Tobacco Unmanufactured, Service (Hotel), Printed Materials, and Other Operating Revenue.
Financials:
- For the quarter ended June 30, 2023, ITC reported a Consolidated Total Income of Rs 17,886.76 Crore, down -1.96% from the last quarter and down -4.91% from the same quarter last year.
- The company reported a net profit after tax of Rs 5,180.12 Crore in the latest quarter.
Investment Rationale:
- ICICI Securities expects volume growth for the formal industry to remain healthy in FY24.
- The FMCG business continued to report healthy growth rates (+16% YoY) with a significant improvement in profitability (EBITDA margin up by 320bps to 11% YoY; EBITDA and EBIT grew by 1.6x and 2.1x, respectively) driven by pricing and cost savings.
- The Hotels business reported decent performance with moderation in occupancy while Average Room Rates (ARRs) witnessed strong growth.
Promoter/FII Holdings:
- Promoters held 0% stake in the company as of June 30, 2023, while FIIs owned 43.62%, and DIIs owned 30.88%.
ITC Hotels Demerger News:
- ITC’s board has approved the demerger of the hotel business into a new entity called ITC Hotels Limited.
- Once demerged, the new company will be listed separately on the BSE Limited and the National Stock Exchange of India.
- The move is aimed at allowing the Hotels Business of ITC to operate as a separate listed entity in the hospitality industry while leveraging ITC’s institutional strengths, strong brand equity, and goodwill.
Shareholder Details:
- Post the implementation of the demerger scheme, shareholders of ITC will directly hold about 60% in the resulting company, proportionate to their shareholding in ITC.
- The balance stake of about 40% in the resulting company will be held by ITC.
The demerger of ITC’s hotel business into a separate listed entity is a strategic move that aims to unlock value and facilitate growth in the hospitality industry. Investors should consider this information along with their own research and investment strategy when evaluating ITC as an investment opportunity.
