No Excise hike in the Budget is a major positive for ITC.
Consistent price hikes in cigarettes coupled with 3-4% volume growth in FY2010E to aid steady growth in core
Moderation of losses in ITC's Non-Cigarette FMCG business, pick up in the Paperboard Division and better
performance by the Hotel Business in 2HFY2010E are likely to improve ITC's growth trajectory over FY2009-11E.
I believe the worst is over for ITC in terms of muted Earnings growth and decline in its cigarette Volumes. I
expect ITC to post a CAGR of 15% and 18%in Top-line and Bottom-line respectively, over FY2009-11E. Moreover,
ITC's sharp underperformance vis-à-vis the Sensex (45% during 1QFY2010) and attractive valuations provides an
attractive entry point for investors looking to play out the India Consumer Story. At Rs198, the stock is trading at
16.5x FY2011E EPS of Rs12. I will suggest accumulate on the stock, with a Target Price of Rs216.