ITC trades at a 60%+ discount to FMCG peers despite zero net debt, 35%+ margins, and consistent cash flows across a decade.
We observe a double discount — tobacco ESG penalty + conglomerate complexity — both of which are structurally unwinding.
Key Risk: Cigarettes carry the overwhelming majority of EBIT. Any regulatory shock hits consolidated earnings disproportionately.
Conclusion: Modestly undervalued at CMP. Clear re-rating path via hotel demerger (done) and FMCG margin expansion (in progress).
Six segments — Cigarettes, FMCG, Hotels, Agri, Paperboards, Infotech. Cigarettes dominate profit. FMCG Others is inflecting toward profitability. Hotel demerger in FY25 removed a structural margin drag.
| Metric | Value |
|---|---|
| Revenue (FY25) | ₹75,323 Cr — 10.9% YoY |
| EBITDA Margin (10Y Avg) | 36.5% — stable across cycles |
| ROIC (FY25) | 56.5% vs WACC 12.4% |
| Net Debt | Nil — Interest Coverage 537x |
| Dividend Payout | 100%+ consistently |
- Revenue growth is cigarette-led — diversification is revenue-level, not yet profit-level
- Margins held 34–39% through COVID and inflation — pricing power is real
- FMCG Others margin: 1.5% (FY18) → 8.5% (FY24) — the key inflection to watch
- ROIC >> WACC for 5 consecutive years — value creation is consistent, not cyclical
| Method | Implied Value (₹/share) |
|---|---|
| DCF — Bear / Base / Bull | 137 — 177 — 340 |
| SOTP | ~375 |
| Peer Comps | ~769 – 793 |
| CMP (at analysis) | ~308 |
SOTP at ₹375 is the most grounded method. DCF gap vs SOTP traces to one assumption — reinvestment rate. Peer comps overstate value due to tobacco-free multiples.
- Cigarette EBIT concentration — revenue diversification masks it
- 67% of DCF value in terminal value — sensitive to growth assumptions
- Reinvestment ramp assumed in DCF has no historical support
Stance: Accumulate on dips. Hold at current levels. Quality business. Fair price. Re-rating already underway. Entry below ₹290 — Exit above ₹420.
| Tool | Application |
|---|---|
| Python | Data pipeline — prices, peer betas, segment comps |
| yfinance | 30 years of market data fetched programmatically |
| pandas | Data cleaning, processing, CSV management |
| Excel | Full financial model — 13 integrated sheets |
| Screener.in | Fundamental data cross-validation |
DCF SOTP Relative Valuation Football Field
WACC DuPont Altman Z-Score Historical VaR
ROIC Segment Margin Decomposition
ITC-Valuation-Project/ │ ├── data/ │ ├── raw/ ← Python fetch outputs │ └── processed/ ← Calculated model inputs │ ├── scripts/ ← 7 Python data fetch scripts │ ├── models/ │ └── itc_master_model.xlsx │ ├── outputs/ ← 10 charts + visuals │ └── README.md
pip install yfinance pandas
python scripts/fetch_itc_prices.py
python scripts/fetch_peer_beta_data.py
python scripts/fetch_peer_tax_rates.py
python scripts/segment_peers_list.py
python scripts/fetch_segment_tickers.py
python scripts/fetch_segment_raw.py
python scripts/calc_ev_ebit_final.pyThen open models/itc_master_model.xlsx
- 60% peer discount on a zero-debt, 35%+ margin business is structural — and structurally unwinding
- ROIC of 56% vs WACC of 12% is among the widest value-creation spreads in Indian large-cap equities
- The DCF vs SOTP gap traces to one assumption — that single variable drives a ₹198/share difference
- Re-rating catalyst already in motion — demerger done, FMCG margins inflecting
Financial Analyst • Equity Research • Data Analytics roles
Data: Yahoo Finance + ITC Annual Reports FY16–FY25. Figures in INR Crores. Not investment advice.