Shares of FMCG major ITC extended gains for the second straight session and climbed nearly 2% to cross the ₹400 level for the first time in intraday trade on Monday, in an otherwise weak broader market. The stock hit a new record high of ₹401.95 during the session, breaching the previous high of ₹398.2 touched in intraday trade on April 11. The recent rally in ITC shares can be attributed to expectations of better earnings in the fourth quarter ended March 31, 2022, as most analysts remained bullish on the stock ahead of Q4 results.
Earlier today, ITC shares opened marginally lower at ₹395 against the previous closing price of ₹395.45 on the BSE. Paring opening losses, the FMCG stock gained as much as 1.64% to hit a record high of ₹401.95. On the volume front, 2.7 lakh shares changed hands over the counter on the BSE as compared to two-week average of 6.99 lakh stocks, while the market capitalisation stood at ₹4.98 lakh crore. The stock has jumped 61% from its 52-week low of ₹249.20 touched on May 12, 2022.
The index heavyweight has been one of the top performers on the Street, delivering nearly 49% returns to its shareholders in the last one year as compared to 19% growth in S&P BSE FMCG index and 4.6% rise in the BSE Sensex. On the year-to-date (YTD) basis, the counter has gained over 20%, while it added nearly 21% in the past six months. The stock has risen 7% in a month and 4% in a week.
Most brokerages have assigned “Buy” rating to ITC, with long term average price target of ₹414.77, a potential upside of 3.4% from the current market price, as per Trendlyne data.
Recently, domestic brokerage Sharekhan reiterated its 'buy' call on the stock, with a target price of ₹450, suggesting an upside potential of 12% from the current price.
JM Financial has also affirmed “Buy” rating with price target of ₹440, saying the government’s increasingly logical stance on tobacco taxation remain a key value-driver for the ITC stock. The agency in its note said there is increasing evidence of the policy environment in recent years being quite supportive.
Prabhudas Lilladher has given “Accumulate” rating with a price target of ₹438. According to analysts at the brokerage house, the Kolkata-headquartered conglomerate is expected to be one of the best performers in the consumer segment in the January-March quarter of 2022. The net profit of the company is expected to grow by 20.8% YoY to ₹5,060.9 crore in Q4 FY23, while sales is projected to rise by 11% YoY to ₹17,236.5 crore. The company’s cigarette volumes are seen expanding by 14%, while FMCG business is expected to post 17.5% sales growth with YoY margin improvement. Among others, paper business is projected to grow 26%, while hotel revenues are likely to expand by 66.3%.
ICICI Securities has given a price target of 420 with a “Accumulate” rating. ICICI Direct expects ITC to register 6.3% revenue growth in Q4FY23, led by a 15.9% growth in the cigarettes business. Net profit is expected to grow 17.2% to ₹4,911.8 crore. The agency estimates around 13% volume growth in cigarettes, while FMCG business is expected to see 19.1% sales growth led by strong traction in foods, discretionary & stationary categories. The hotels segment is estimated to grow 77.8% led by post-covid pent up demand. The growth in the paperboard segment is expected to moderate given RM prices have declined & companies are taking price cuts accordingly. The segment is likely to grow by 7.6% in Q4. Agri business is likely to see a 25.4% sales decline on account of export restriction on wheat. The brokerage expects 340 basis points (bps) gross margin improvement & similar expansion in operating margins to 35.3%.