The share price of tobacco, FMCG to hotel major ITC gained over 3% in intraday trade on Monday, hitting over a three-year high as investors are betting high on the stock amid earnings optimism. The FMCG heavyweight has risen more than 7% in the last two trading days and around 10% in the past six sessions.

Continuing its uptrend, the meme-favourite stock opened higher at ₹285.10, against the previous closing price of ₹284.35, and rallied as much as 3.15% to hit over a 3-year high of ₹293.30 on the BSE. The stock breached its previous high level of ₹290.45 touched on May 24, 2019. It has soared 31.5% against its 52-week low of ₹200.85 on July 9, 2021.

Reversing some of the early gains, ITC shares closed at ₹291.80, up 2.62% on the BSE, driven by strong volume. As many as 10 lakh shares worth ₹29.02 crore changed hands over the counter, as compared to the two-week average volume of 4.89 lakh stocks. The market capitalisation of the country’s eleventh most valued firm stood at ₹3.6 lakh crore at the end of trade on Monday. In comparision, the BSE Sensex settled at 326 points higher at 53,234 levels, with 24 of 30 shares closing in the green zone.

Technically, the stock trades in a bullish range, moving higher than its 5-day, 20-day, 50-day, 100-day, and 200-day averages. It has risen 8% in a week, 6% over a month, and 33% in the calendar year 2022. The stock has delivered 43.5% returns to its shareholders in the past one year, climbing from ₹203.65 on July 5, 2021, to ₹291.50 today.

What fueled the rally in ITC shares?

The recent surge in ITC shares can be attributed to solid financial performance in March quarter of 2022, recovery in demand, and a healthy margin outlook for cigarette business. With a volume growth of 9%, cigarette business surpassed its pre-Covid levels in Q4 FY22, while FMCG segment registered a steady growth of 12% despite a high base. Hotels business also witnessed recovery, while agri as well as paperboards businesses also achieved decent growth in January-March quarter of 2022.

Post Q4 results, domestic brokerage YES Securities had recommended a “BUY” rating with a target price of ₹308, citing inexpensive valuations and a strong dividend yield.

Another brokerage firm, ICICI direct Research had also assigned a “BUY” call with a target price of ₹301, for a time horizon of 12 months. It expects cigarette volumes, price growth in FMCG business and strong agri exports to drive revenues for the company in the future.

ITC, the biggest cigarette and second largest FMCG company in India, reported a 11.8% year-on-year growth in its net profit at ₹4,191 crore for the fourth quarter ended March 31, 2022. The revenue from operations rose 15% YoY to ₹17,754 crore in Q4FY22, led by FMCG and cigarette business, steady performance from agri and paper business and continued recovery in hotels business. The board of the company also recommended a final dividend of ₹6.25 for the financial year ended 31 March, 2022, subject to requisite approval.

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