MUMBAI:
Religare Capital Markets has valued the ITC stock on a SOTP basis and has a
'buy' rating with a target price of Rs
220.
ITC has reported losses of
Rs 120 crore in other FMCG business in Q1FY09. In the hotels business, ITC
expects growth in the mid-teens. This growth will come form higher ARRs since
occupancy levels are expected to remain stagnant at 65 per cent. Margins for
paper and paperboards will improve. ITC current trading at a P/E of 18 times and
15.2 times and an EV/EBITDA of 12.1 times and 10.1 times its FY09E and FY10E
earnings respectively. The stock is currently trading at Rs
174.
The ban on smoking in
public places has been in place in India since November 2001, when it was
enforced by the Supreme Court. The new enforced from October 2, 2008 merely
extends coverage of the ban to private offices, hotels, pubs and airports. About
70 per cent of the cigarettes sold in India are loose and used in non-public
places. The volume of cigarettes smoked in hotels and private offices is
miniscule and thus, the new smoking ban is unlikely to have a material impact on
ITC's cigarette volumes.
ITC
hiked cigarette prices by 5-15 per cent in August 2008. The hike covered 60 per
cent of its total portfolio with a weighted average price increase of 6 per
cent.
The brokerage expects a 3
per cent volume de-growth in Q2FY09 in line with that in Q1FY09.