Shares of ITC gained nearly 3 per cent at Rs 280.10 on the NSE in Friday’s intra-day trade in an otherwise weak market, as a good defensive play in a volatile environment. The FMCG stock quoted close to its 52-week high of Rs 282.30 touched on May 20, 2022. In comparison, the S&P BSE Sensex was down 1 per cent at 52,470 at 10:46 am.
Stock Price History
In the past three months, ITC has outperformed the market by gaining 10 per cent, as against 12 per cent decline in the Sensex. Further, in six months, the stock has rallied 28 per cent as compared to a 10 per cent fall in the benchmark index. ITC shares have jumped around 38 per cent in a year compared to over 11 per cent fall seen in benchmark NSE Nifty 50, and the positive momentum is likely to continue in the near-term, according to analysts.
Apart from having a near monopoly in its traditional business of cigarettes, ITC is also India’s leading FMCG marketer, a clear market leader in the Indian paperboard and packaging industry, a globally acknowledged pioneer in farmer empowerment through its wide-reaching agribusiness, a pre-eminent hotelier in India with chain of luxury hotels and a specialized global digital solutions provider through its wholly-owned subsidiary, ITC Infotech.
“While valuations of global Tobacco peers have been restored to their pre-pandemic levels (Jan’19), ITC still trades at a 24 per cent discount to its Jan’19 valuation of 25.4x one-year forward EPS. We value ITC at 21x FY24E EPS, implying a 65 per cent premium to its global peer average. We believe the premium multiples are justified, given its strong visibility over the medium term and the defensive nature of its business, especially in a volatile macro environment,” analysts at Motilal Oswal Financial Services said in ITC’s annual update.
Benign tax ruling, coupled with new products driving Cigarette volumes; Ecommerce ramp-up could provide tailwinds for FMCG business, yet widening distribution, and supply chain optimization coupled with smart manufacturing optimizing costs are key positives from ITC’s recent performance, according to analysts at HDFC Securities.
Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 18,252.64 Crore, down -2.85 per cent from last quarter Total Income of Rs 18,787.72 Crore and up 22.32 per cent from last year same quarter Total Income of Rs 14,921.76 Crore. Company reported net profit after tax of Rs 4,259.68 Crore in latest quarter.
Should you Buy, Sell or Hold?
ITC’s performance in FY22 has been robust on all fronts including strong recoveries across cigarettes and hotels, over 110 new products launched in FMCG and margin maintained, said IIFL Securities. “Taxes are unlikely to increase before the Union Budget which makes ITC better placed than peers in the near term, in light of its reasonable valuations,” the brokerage said. It maintained ‘buy’ rating on the stock with a target price of Rs 305, implying 15% potential rally going forward.
Further, Sharekhan has buy call on ITC with a target price of Rs 290. The current market price of ITC is Rs 274.
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