Chennai, February 8

The stock of cigarettes-to-hotels conglomerate ITC zoomed 81.47 per cent from its 52-week low of ₹207 on February 24, 2022, to ₹375.65 at close on Wednesday as against BSE Sensex’s and NSE Nifty’s flat returns.

In fact, it touched a 52-week high of ₹388.20 on Monday. The stock closed at ₹374.55 on the NSE on Wednesday.

FPIs hike stake

According to analysts, ITC was lapped up by investors as a defence play in early 2022 as the broader market was struggling. However, with its strong performance in all its verticals, ITC has turned attractive on a fundamental front too, they added. “Of late, foreign portfolio investors too have shown interest in the counter,” they added.

Foreign portfolio investors’ stake in ITC increased to 12.51 per cent at the end of December from 12.25 in the September quarter. On the other hand, LIC pared its stake to 15.29 per cent (15.57 per cent) and retail investors to 11.39 per cent (11.47 per cent).

For investors who stayed invested in this stock, it has been worth the wait in gold! For instance, Motilal Oswal pointed out that ITC has gained about 45 per cent since its “upgrade to Buy” call in June 2022.

“ITC’s performance in the last one year has been good on all fronts - it has seen decent growth in cigarettes and hotels with many new products launched in FMCG and margins maintained despite higher inflation. High dividend payout has also led to buying interest in the stock,” Ruchit Jain, Lead - Research, 5paisa.com, told businessline.

Goldman Sachs hikes TP

“All business firing,” said an equity research report from investment banking firm Goldman Sachs. Besides, the company’s Q3-FY23 PAT grew 21 per cent year-on-year, “which was ahead of our estimates,” it added. “We raise our FY23/24/25 EPS by 4 per cent/3 per cent/3 per cent, respectively, given the strong volume traction in cigarettes and profit margins in the FMCG and paper business,” the report said maintaining its ‘Buy’ recommendation of the stock with an increased target price of ₹450 (₹430 earlier).

According to a report from ICICI Securities, “We expect volume growth for formal industry to remain healthy in FY24. We reckon there’s opportunity to drive (some) price-driven growth as adverse effects of price elasticity reduces during times of high consumer inflation like these.

“ITC’s FMCG-foods scale-up has all the ingredients to drive a long-term trajectory,” reported Centrum Broking. With higher FMCG/Cigarette revenues, “we tweak earnings and maintain strong BUY, with a revised DCF-based TP of ₹470 (implying 28.5x avg. FY24/FY25 EPS), it said.”

BNP Paribas said ITC trades at 23x FY24E P/E with 4 per cent dividend yield, “which we still find attractive despite strong stock performance in the last year”.

However, the agri division is still witnessing pressure due to restrictions imposed on wheat and rice exports by the government during the year with revenue in Q3 declining 37 per cent y-o-y. “We lower our FY23-25 revenue by c4 per cent on lower Agri revenue,” added BNP Paribas.

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