My thread on X-ray analysis on ITC business... Not a reco. but a thorough analysis... and hopefully can learn n share on how to analyse a business and value... share n spread... #ITC #Stockanalysis #Stockvaluation #ITCIndia
First - Business analysis #ITC #Stockvaluation - Keytakeouts - Overreliant for revenue(42% from Cig) and even more for earnings (67%-PBT from Cig)..This pie has degrown n shows 5 yrs. CAGR of 5-6% in both sales & earnings - Diversification still needs more FCF pumping! 
Business analysis - FMCG-Cig is the cashcow n continue to remain so as cash gets pumped into newer businesses such as FMCG-Food,Agri and paper&pkgn. These newer business will show lower RoCE but ITC is preparing for growth from these segments...
#ITC Valuation - EPS based - ITC has huge consistent Free cash flows which has grown by 10% (CAGR-5yrs) while EPS has grown at 7.5% (CAGR-5yrs) - Forward EPS valuation method (Assumption) - Desired RoR -15%, Exit PE - 25 puts the intrinsic CMP @ Rs.228/- - So Undervalued
#ITC #Stockvaluation - DCF method (Discounted Cash Flow) Assuming 10-12% growth in FCF with discount factor of 13% and terminal growth rate of 6%...2 stage DCF gives a total equity value at a pershare level ~Rs.150 -Rs.160..
Overall - #ITC looks a good value bet @ current prices but it doesn't look a growth engine unless there r drastic improvements seen in Non-Cig business... Its a good dividend play but I wud give it a pass for now!!
NOT A RECOMMENDATION!! This is for informative purposes only!!
NOT A RECOMMENDATION!! This is for informative purposes only!!
#ITC Valuation - EPS method - CMP at 180 with PE of 15..gives you an EPS of 12.2... Assuming 15% CAGR returns in 5 yrs on ur invt.. the CMP should be 360 by 2025..Give a healthy PE of 25 and the EPS wud have grown at 3.5% CAGR to 14.5. which is way underestimated - so undervalued
