ITC Share Price Target 2025: Demerger Of Hotels Business On January 1 - Buy, Sell Or Hold?

Brokerage firm Antique Stock Broking Limited has reiterated its "Buy" rating for ITC, pegging the current market price (CMP) at Rs 474 with a target price of Rs 563. This reflects a modest price change of 1% in its valuation estimates.

The report highlights ITC’s resilience and strategic positioning in a challenging environment, stating:
“ITC is better placed in the current challenging environment backed by its a) broad-based cigarette portfolio, b) premium FMCG portfolio, c) buoyancy in hotels, and d) improvement in the agri business.”

The brokerage expects the cigarette segment to deliver 3% volume growth and 6% value growth in Q3 FY25, driven by innovation and product launches across price points.

Cigarettes: Stability Through Innovation
ITC’s cigarette portfolio remains a cornerstone of its growth strategy. Antique projects 3% YoY volume growth and 6% value growth in Q3 FY25, attributing this to the company's consistent focus on innovation.

Brands like Classic Icon, Gold Flake Indie Mint, Classic Connect, and American Club (including clove variants) are driving consumer engagement.
However, the cigarette segment’s profit margins could face short-term pressure due to rising leaf tobacco prices. Looking ahead, the brokerage forecasts a 3% volume CAGR and 6% value CAGR for cigarettes over FY24–FY27.

FMCG: Premium Portfolio Leads the Charge
ITC’s FMCG business is expected to outperform peers, with an 11% revenue CAGR forecasted for FY24–FY27.

Growth drivers include branded wheat flour and its resilient premium portfolio in food and personal care. However, sharp raw material inflation (e.g., wheat and vegetable oil) could weigh on short-term profit margins. Relief may come in Q4 FY25 as the Rabi crop harvest is expected to moderate commodity prices.

Hotels and Agri-Business: Strong Momentum
The hotel division, a key segment poised for demerger, continues to deliver strong double-digit sales growth despite a high base. Antique revised its EBITDA estimate for ITC’s hotel business upward by 10%-31% for FY25E-FY27E, increasing the EV/EBITDA multiple to 25x from 20x.

The agri-business segment is also performing well, with strong growth in rice, leaf tobacco, and value-added spices exports. Despite challenges such as high commodity prices, the segment remains a crucial revenue contributor.

Paper Business Faces Challenges
ITC’s paperboard segment is experiencing headwinds due to dumping by Chinese competitors and elevated domestic wood prices. This pressure is expected to persist in the near term, impacting overall profitability.

‘Only the paper business could continue to witness pressure in the short term as a result of dumping of Chinese paper and higher domestic wood prices,’ the report reads.

ITC Hotels Demerger: Key Dates and Implications
In a significant development, ITC has announced January 6, 2025, as the record date for the demerger of its hotel business. An exchange filing clarified:
“The Company and ITC Hotels Limited (ITCHL) have mutually agreed to fix Monday, 6th January 2025 as the Record Date for determining the shareholders of the Company to whom equity shares of ITCHL would be allotted.”

Should You Buy, Sell, or Hold ITC?
With a robust portfolio spanning cigarettes, FMCG, hotels, and agri-business, ITC is well-positioned for growth. Despite near-term margin pressures in cigarettes and FMCG due to raw material inflation, the company’s innovation-driven strategy and premiumization in FMCG provide strong upside potential.

The demerger of ITC’s hotel business could unlock additional value for shareholders, with the buoyant hospitality sector enhancing profitability. For long-term investors, Antique’s target price of Rs 563 and a PER of 26x for FY27 make ITC a compelling “Buy” recommendation.

‘We maintain BUY recommendation with a SoTP-based TP of INR 563 based on FY27 estimates, implying a PER of 26x,’ as per the report

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