Cigarettes-to-hotels conglomerate ITC briefly became part of the elite club of companies after its market capitalisation crossed ₹5 lakh crore mark on Thursday on the back of sustained rally in the recent past. With this, the FMCG major became the 11th BSE-listed entity to touch the landmark. The stock has risen nearly 20% in the current calendar year amid earnings optimism and plans to demerge its hotels business.

Snapping two sessions losing streak, ITC shares opened marginally higher at ₹399.05 against the previous closing price of ₹398.4 on the BSE. During the session so far, the Sensex heavyweight gained as much as 1% to hit a fresh all-time high of ₹402.60 intraday, breaching the previous high of ₹402 hit in intraday trade on April 18. 

The blue chip stock currently trades 61% higher than its 52-week low of ₹249.20 touched on May 12, 2022. The counter has risen 54% in the last one year, 14% in six-month period, and 5% in the past one month.

Most brokerages remain bullish to ITC, with long term average price target of ₹414.77, a potential upside of 4% from Wednesday’s closing price, as per Trendlyne data.

“ITC shares touched a 52-week high, reflecting a positive outlook for the company. The legal cigarette industry is gaining market share from illegal sales due to rational tax policy, which bodes well for ITC's cigarette business. Both the cigarette and FMCG sectors are expected to witness double-digit earnings growth in FY24, driven by good margin recovery in the FMCG business. ITC's valuation remains attractive compared to other consumer staples firms, even at the current all-time high, making it a strong choice for investors,” says Sonam Srivastava- Founder at Wright Research.

Ahead of Q4 earnings results, global brokerage CLSA raised the target price of FMCG company’s shares to ₹430 from ₹415 earlier. The agency has maintained an ‘outperform’ rating on the stock, citing its better capital allocation and higher margin trajectory from FMCG business. The brokerage in its report highlighted that corporate action such as the demerger of its hotel business is awaited.

Domestic brokerage Sharekhan reiterated its 'buy' call on the stock, with a target price of ₹450, while JM Financial has affirmed “Buy” rating with price target of ₹440, saying the government’s increasingly logical stance on tobacco taxation remains 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 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 is likely to expand by 66.3%.

JM Financial expects ITC to post a profit of ₹4,798.5 in Q4 FY23, up 14.5% as compared to a year ago. The sales are expected to grow 7.7% YoY to ₹17,483 crore, supported by double-digit volume growth in cigarettes. The non-cigarettes segments - FMCG, Hotels & Paper - are also projected to continue contributing strongly.

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%.

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