NEW DELHI: Even as Nifty FMCG index has risen more than 23% in the last 6 months, share prices of sector giant ITC have risen by less than 2% during the same period.
This underperformance, according to brokerage firm CLSA Global Markets, makes ITC’s valuation compelling as it believes that the company’s FMCG business is firmly on path for a profitable scale-up and there is an optimism for the company’s non-cigarette FMCG business.
CLSA in a report published on Tuesday has maintained its “buy” rating on the stock after initiating coverage in October 2020. The brokerage firm also retained its price target of `265 (time 12 months), translating gains of around 32% from current levels.
“We expect its FMCG business to deliver 31% Ebitda CAGR (compounded annual growth rate) over FY20-24CL on the back of industry tailwinds, margin levers, and improving asset utilisation. Unlike in the past, inorganic growth should offer an additional growth lever. Its valuation is compelling with a record-high PE discount to the FMCG average (57%) and a 6% dividend yield,” CLSA said in its note.