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ITC hits new high in a subdued market; zooms 63% thus far in 2022


Shares of hit a new high of Rs 356.20, gaining 2 per cent on the BSE in Wednesday’s intra-day trade, in an otherwise subdued market.

The stock of the tobacco major has surpassed its previous high of Rs 354, which it had touched on October 21, 2022, after the company delivered good results in the July-September quarter for the 2022-23 financial year (Q2FY23). In comparison, the S&P BSE Sensex was down 0.40 per cent at 60,877 points at 12:49 PM.

Thus far in the calendar year 2022, has rallied 63 per cent, as against 2.8 per cent rise in the Sensex. Most brokerages have recommended either a ‘buy’ and an ‘accumulate’ rating on with target prices in the range of Rs 365 to Rs 405.

ITC posted yet another quarter of strong numbers in Q2FY23 with gross revenues growing by 27 per cent year-on-year (YoY), largely led by strong double-digit growth across categories. Margins sustained YoY despite inflationary pressures in the FMCG business, and lower margins in the Agri business. Its operating profit margin stood flat at 36.4 per cent.

All key business verticals registered strong performance with the cigarette, non-cigarette FMCG, Agri and paperboard, paper & packaging (PPP) business grew by 23 per cent, 21 per cent, 44 per cent and 25 per cent YoY, respectively. Cigarette sales volumes are expected to improve further with government not increasing taxes on cigarettes for the second consecutive year.

Brokerage firm Sharekhan expects growth momentum in the cigarette sales volumes to sustain with government actions on curbing illicit cigarette sales. The hotels business, too, is expected to post strong performance in the second half due to a strong business period. Non-cigarette FMCG revenues, the brokerage added, would grow in double digits while margins might improve sequentially in the coming quarters.

“Strong earnings visibility with improving growth prospects of core cigarette business and margin expansion in non-cigarette FMCG business, along with a high cash generation ability and strong dividend payout will reduce valuation gap in the coming years,” the brokerage firm said. It maintain a ‘Buy’ on the stock with a revised price target of Rs 402.

While near term outlook is strong, analysts at Prabhudas Lilladher expect slowdown in growth post FY23 given high base of the current year. The brokerage firm expects incremental returns to accrue in a more calibrated manner. Any punitive increase in cigarette taxes is a key risk, it added with an ‘Accumulate’ rating on the stock and a target price of Rs 365 per share.

ICICI Securities has raised their cigarette volumes growth estimate from 10 per cent to 13 per cent for FY23, and has incorporated higher hotel occupancies and average room rate (ARRs) after factoring in strong H1FY23 performance and future outlook. It maintains BUY recommendation on ITC with a 12-month target price of Rs 405 per share.

Stable taxation on cigarettes is expected to maintain current volumes runrate. The company has been gaining market share in cigarettes from last one year through new premium products & trade promotions, the brokerage firm said.

“We are positive on ITC fueled by a better-than-expected demand recovery and a healthy margin outlook in Cigarettes, healthy sales momentum in the FMCG business, smart recovery from the Hotels business, and better capital allocation in recent years,” said those at Motilal Oswal Financial Services.

A stable tax environment for Cigarettes in recent years has allowed ITC to calibrate price increases to avoid a disruption in demand. The brokerage firm expects this trend to continue, which should result in improved Cigarette volumes and earnings visibility over the medium term. It maintains BUY recommendation on ITC with 12 month target price of Rs 400 per share.


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