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· ITC
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Jump to full article: The Times of India, 2008-11-18
Intro: CLSA has maintained a �?~buy�?(TM) recommendation on ITC, banking on stable earning growth and attractive valuations with its PE having improved from a low of nearly 10x in 2003 to about 17x.
"ITC's cigarette volumes have remained strong despite two years of heavy tax increases, highlighting its pricing power. With capex peaking in FY09, we expect a 42 percent CAGR in free cashflow (FCF) over FY08-11. The firm's earnings CAGR was 18.4% over the past decade and average variance was only 3ppts. The new smoking ban appears to have had little effect and CLSA does not expect it to have much impact in the medium term. ITC remains net-cash, adding stability to the earnings profile.
CLSA has projected a 15 percent CAGR in the cigarette business EBIT over FY08-11 while the company's overall EBIT will expand faster on the back of a 23 percent EBIT CAGR in other divisions.
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