ITC Hits Rs 400-mark, Stock Doubles Investors Money in Less Than 2 Years; Should you Buy?

Multibagger Stock: Shares of the FMCG giant ITC hit a new high of Rs 401.70, gaining 1.6 per cent on the BSE in Monday’s intra-day trade in an otherwise weak market amid sustained buying interest by foreign portfolio investors (FPIs).

ITC share price today touched an intraday high of Rs 401.7 per share. Earlier, on Thursday, ITC stock had ended at Rs 396. ITC share price has gained over 20% year-to-date, after drawing criticisms and significant trolling from investors over the years.

“ITC Ltd.’s share price has reached a new all-time high, crossing the Rs 400 mark and gaining over 20% since the start of this year. This surge in share price reflects the positive sentiment among investors, likely driven by the company’s strong financial performance, growing demand for FMCG products in India, and favorable macroeconomic conditions,” said CA Manish Mishra, Virtual CFO

The fast-moving consumer goods (FMCG) and cigarette maker has doubled or zoomed 101 per cent from a level of Rs 199.95 on May 5, 2021.

FPIs have increased their stake in ITC for the third straight quarter. In March 2023 quarter, their holding in ITC increased to 12.87 per cent from 12.51 per cent at the end of December 2022 quarter. They held 12.25 per cent stake in September 2022 quarter, the shareholding pattern data shows.

ITC’s market capitalisation (market-cap) is now seen inching towards the Rs 5 trillion mark after a sharp upward movement in the stock. The company’s market-cap stood at Rs 4.98 trillion, the BSE data shows.

In addition, ITC has given Rs 6 per share interim dividend so far for the last financial year, and had given Rs 11.5 per share dividend for the previous fiscal year.

On April 7, the conglomerate announced that it has divested its entire shareholding of 26 per cent of the capital held in its JV, Espirit Hotels. Following this, Espirit is no longer a Joint Venture for the company. ITC held 4.7 crore shares in the company prior to exiting, the firm announced in a filing with the exchanges.

Will the ITC Stock Continue to Rise?

“We estimate 6.3 per cent revenue growth for ITC led by strong 15.9 per cent growth in the cigarette business. We estimate ~13 per cent volume growth in cigarettes. Moreover, FMCG business is expected to see 19.1 per cent sales growth led by strong traction in foods, discretionary & stationery categories. The Hotels segment is estimated to grow 77.8 per cent 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 7.6 per cent in Q4. Agri business is likely to see a 25.4 per cent sales decline on account of export restriction on wheat. We expect 340 bps gross margin improvement & similar expansion in operating margins to 35.3%. Net profit is expected to grow 17.2% to Rs 4911.8 crore,” said ICICIdirect.

“We expect the cigarette sector to grow 16 per cent on-year (13 per cent volume), FMCG to grow at 14% (mid volume growth) primarily led by price growth, hotels (continued strong momentum), papers (recovery) and agri to decline on a high base. EBITDA margins are expected to expand 450 bps on account of GM expansion, better mix, operating leverage and cost savings,” said Axis Securities. For the brokerage, the key monitorables are the demand outlook on rural vs urban and competitive intensity, along with RM trends and the hotels and agricultural business outlook.

Sharekhan reiterated Buy on ITC with an unchanged price target of Rs 450. Attractive valuations at 23x/21x its FY2024/FY2025E EPS and double-digit earnings growth visibility make it our preferred pick in the large consumer goods space from a medium to long-term perspective, the brokerage firm said in March 31, 2023 report.

The recent amendment in the Finance Bill 2023 on tobacco/tobacco products is unlikely to have any material impact on tax rates on cigarettes. Volume growth momentum in the cigarette business is likely to sustain in the quarters ahead. The consistent good growth in the cigarette business, strong tailwinds in the hotel business and scale-up in non-cigarette FMCG business makes its earning visibility better compared with peers, it added.

Ravi Singhal-CEO GCL Broking said: “As inflation falls, WPI falls as well. Palm oil prices have plummeted 50 per cent from their highs, so the margin appears to be healthy and ITC began new shopping to broaden its portfolio, such as sprout life foods 100 per cent. In addition, the Cigarette margin has increased still again. Technically, our target Rs 470 stop loss at Rs 372 appears to be in fine condition.”

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