JPM on ITC ; Neutral, TP Rs 310

Q2 EBITDA was 3% ahead of est, led by better-than-expected prints from non-cigarette businesses, even as the cigarette division’s operational performance was in line Cigarette EBIT declined -27% y/y, weighed down by lagging price hikes and volume decline (JPMe: 7-8%). A reset in cigarette portfolio mix is underway with the salience of RSFT and DSFT nearly converging. ITC’s ongoing portfolio re-architecture and staggered pricing actions should help progressively narrow the EBIT decline. With further pricing actions likely, particularly in RSFT, we expect EBIT/stick neutrality by Q4.

ITC LTD

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