ITC Share Price: Shares of ITC continued to extend its rally on Thursday. The FMCG scrip hit a new high at Rs 416.50, up 1 per cent on the BSE in Thursday’s intra-day trade on expectations of strong earnings.
Thus far in the calendar year 2023 (CY23), the stock of fast moving consumer goods (FMCG) to hotel major has rallied 25 per cent. In comparison, the S&P BSE Sensex was down 1.2 per cent thus far in CY23.
The diversified conglomerate topped the market capitalisation of Rs 5 lakh crore on Tuesday and pipped IT major Infosys to become the sixth most-valued Indian company. It also overtook HDFC and State Bank of India (SBI) in terms of market cap last week. However, it still lags behind Hindustan Unilever (HUL), which is valued at Rs 5.88 lakh crore.
Shares of ITC have turned multibagger from their Covid-19 lows. The stock is up 165 per cent from its Rs 155, a level seen in May 2020. The stock has risen 25 per cent in the year 2023 so far. The stock has rallied about 60 per cent in the last one year.
Despite this stellar rise in stock prices in the last few months, ITC continues to trade at a steep discount to Hindustan Unilever. ITC’s price-to-earnings (P/E) multiple is 28 times, whereas that of HUL is commanding a P/E multiple more than twice of ITC at 60 times.
ITC remains among the favorite counters of brokerage firms from the FMCG space. They have a mildly positive view. Analysts expect ITC to report a strong performance on a year-on-year (YoY) basis in terms of sales, cigarette volumes, EBITDA, EBIT margins and adjusted profit. Over, the company may post flat numbers on a quarter-on-quarter (QoQ) basis.
Brokerage firm Prabhudas Lilladher expects ITC to report a sale at Rs 17,236.5 crore, rising 11 per cent YoY and 6.2 per cent QoQ. EBITDA is seen at Rs 6,401.4 crore, up 22.5 per cent YoY and 3 per cent QoQ. ITC can report an adjusted profit after tax (PAT) at Rs 5,060.9 crore, up 20.8 per cent YoY and flat on QoQ basis.
“Cigarette volumes are likely to expand by 14 per cent. and FMCG to post 17.5 per cent sales growth with YoY margin improvement. Paper business to grow 26 per cent, while Hotel revenues to grow by 66.3 per cent,” said Prabhudas Lilladher, who expects ITC to be among the best performers in the space. It has an ‘accumulate’ rating on the stock with a target price of Rs 444.
The management said the FMCG businesses during the December quarter (Q3FY23) witnessed strong growth across channels and markets (both urban and rural) driven by ramp-up in outlet coverage, enhanced penetration and superior last mile execution.
As seen in the past, stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, continues to enable volume recovery for the legal cigarette industry from illicit trade leading to higher demand for Indian tobaccos and bolstering revenue to the exchequer from the tobacco sector, the management said.
Meanwhile, ITC is expected to maintain its volume growth momentum in the cigarette business, given no price hikes in the near term and government curbing illicit cigarette sales. Strong growth in the non-cigarette FMCG business, stellar recovery in the hotel business, and sustained growth in the PPP business will drive double-digit revenue and PAT growth over the next two years, Sharekhan said.
According to analysts at ICICI Securities, cigarette volumes would continue to grow at faster pace (10-13 per cent) led by stable taxation in last five years & curb on illicit cigarettes. Further, ITC (FMCG) business is also expected to see strong growth of 19.1 per cent led by higher growth in foods, discretionary & stationary segment, the brokerage firm said in Q4FY23 result preview.
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