As sentiment improves, ITC share hits Rs 400
NEW DELHI: After being range bound for over 8 years and hitting steep lows in October 2020, shares of FMCG giant ITC have seen a turnaround like no other in the last two years. At a time when most blue-chip stocks are reeling under the pressure of a looming slowdown and challenges on the global front, ITC shares have risen over 48% in last one year.
The scrip on Monday hit a 52-week high as it surpassed the Rs 400 level. It has surged over 20% so far in 2023.
According to industry experts, ITC Chairman Sanjiv Puri’s revamped strategy, ITC- Next, has started to show results and solid growth throughout FY23 has attracted the interest of investors. “ITC’s performance in the past 3 consecutive quarters has been above expectations. Unlike staples peers, the company has displayed resilient operating performance of its FMCG business,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
In Q3FY23, despite commodity cost headwinds, FMCG operating margin came in at 10% (up 88bps YoY) with raw material inflation being mitigated through pricing actions and cost interventions. The hotel business has reported a sharp turnaround and bookings have crossed the pre-Covid level. Jasani said this sort of consistency across segments with some visible relief on the cigarette taxation front can drive a further reiterating on the valuations front.
Motilal Oswal Financial Services in a note said they expect a 13% YoY volume growth in cigarettes, maintaining mid-single digit four-year average volume growth for ITC in Q4. ”We expect EBITDA margin to remain flat sequentially, but expand by 500 bp YoY. The corporate actions on the demerger of businesses a key monitorable,” it said in its earnings preview for Q4FY23.
Brokerage firm Sharekhan reiterated Buy on ITC with an unchanged price target of Rs 450. “Its revamped strategy ‘ITC-Next’ will help ITC’s non-cigarette FMCG business to clock a CAGR of 17% over FY22-24 and help OPM cross 10% in coming years. Its cigarette sales volumes are likely to grow in low double digits. Query sent to ITC on what are the factors that are pushing up the conglomerate’s share price remained unanswered.