Sharekhan has maintained its buy rating on ITC with a price target of Rs 206 in its April 13, 2009 research report.
“We expect ITC’s cigarette realisation to rise by 5-6% in FY2010 as a result of the price hikes implemented by the company and the change in its volume mix. Despite the government’s efforts to curb the consumption of tobacco and tobacco products, historically the cigarette volumes of the company have been relatively inelastic to price increases. However, the key thing to watch out for in the coming quarters is the performance of the non-cigarette FMCG business in terms of the sales growth and the quantum of loss. At the current market price the stock trades at 21.2x its FY2009E earnings of Rs 8.8 and 18.2x its FY2010E earnings of Rs 10.3. We maintain our Buy recommendation on the stock with the price target of Rs 206,” says Sharekhan’s research report.
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