ITC shares fell 0.4 percent intraday on June 17 after global brokerage house CLSA slashed price target on lower cigarette multiple.
“We see a decline in free cash flow and marginal improvement in return ratios in 2018-19,” the research firm said. It added that concerns about tobacco business are still there but FMCG has ramped-up well.
CLSA said it lowered cigarette business valuation multiple given lack of earnings growth visibility, hence it slashed price target on the stock to Rs 365 from Rs 400 earlier while maintaining buy call as risk-reward is attractive.
“We lower cigarette multiple from 27x to 24x for FY21, though cigarette business’ return on capital employed continued to rise to an astonishing level,” it said.
The stock lost 6 percent in last one month. It was quoting at Rs 277, down Rs 0.95, or 0.34 percent on the BSE at 0946 hours IST.
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