ITC shares at all-time high: Shares of ITC, a Kolkata-based conglomerate whose operations span from cigarettes to other FMCG products to hotels, gained 2 per cent to Rs 395.15 on the BSE in Tuesday’s intra-day trade. reached a new high of. business, on expectations of strong earnings growth.
Shares of ITC rose Rs 6.5 – or 1.7 per cent – to touch a record Rs 395.2 on the BSE at the day’s strongest level, trading above the Rs 395 level for the first time ever. The stock of the cigarette maker – whose popular brands include Classic, Gold Flake, Insignia, American Club, India Kings and Wills Navy Cut – was higher for the fourth consecutive session.
ITC crossed its previous high of Rs 394 which was touched on Feb 3, 2023.
Exchange data showed that on Monday, 2.74 million shares in ITC and 95 per cent of the total volume traded on the BSE got delivered.
The market capitalization (market cap) of ITC has now inched towards the Rs 5 trillion mark after a sharp upward move in the stock. The company’s market-cap touched Rs 4.91 trillion during intra-day trade today and the stock is less than 2 per cent away to achieve the Rs 5 trillion mark.
On 7 April, ITC announced that it has divested its entire stake of 26 per cent of the paid-up share capital held in its joint venture company Spirit Hotels Pvt Ltd (Espirit). Consequently, Espirit ceases to be a joint venture company of the company, it said.
What should investors do?
The ITC (FMCG) business is also expected to witness a strong growth of 19.1 per cent, led by higher growth in food items, discretionary and stationery segment. According to analysts at ICICI Securities, cigarette volumes will continue to grow at a faster pace (10-13 per cent) over the last five years due to stable taxation and curbing of illicit cigarettes.
The brokerage firm estimates ITC’s revenue to grow by 6.3 per cent on the back of a strong 15.9 per cent growth in cigarette business. This forecasts an increase in volume in cigarettes of about 13 percent. “We expect 340 bps gross margin improvement and a similar expansion in operating margin to 35.3 per cent. Net profit is expected to rise 17.2 per cent to Rs 4911.8 crore,” said analysts in the Q4 result preview.
Sharekhan reiterated buy on ITC with an unchanged price target of Rs 450. Attractive valuations at 23x/21x for FY24/FY25E EPS and double-digit earnings growth visibility make it our favorite pick in the large consumer goods space over the medium to long term. Perspectives, the brokerage firm said in a report dated March 31, 2023.
The recent amendment in the Finance Bill 2023 on Tobacco/Tobacco Products is not likely to have any material impact on the tax rates on cigarettes. The volume growth momentum in the cigarette business is likely to be sustained in the coming quarters. Continued healthy growth in cigarette business, strong convergence in hotel business and growth in non-cigarette FMCG business give it better earnings visibility compared to peers.
Motilal Oswal Financial Services (MOFSL) said in a results preview that improving cigarette demand, improving hotel business, low input cost pressures versus peers and attractive valuations make ITC our top pick from a one-year perspective.
The brokerage firm expects cigarettes to post 13 per cent year-on-year volume growth, maintaining the mid-single digit four-year average volume growth for ITC in the fourth quarter. “We expect EBITDA margin to be flat sequentially, but to expand faster by ~500 bp YoY. Corporate action on demerger of businesses is a major watchable one,” said the brokerage firm.
ITC shares have gained 18 per cent so far in 2023, beating the Nifty 50 headline index’s three per cent decline during the period.
ITC stock has given investors 47 per cent returns in one year till Tuesday, outperforming the 50-point market benchmark, which remained flat.
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