Data showed FPI ownership in ITC, which stood at 13.31 per cent at the end of December 2020, was on a regular decline, only to jump from a sub-10 per cent level in December 2021 to 11.99 per cent in the March quarter. This was the same quarter when the institutional class pulled out over Rs 1.10 lakh crore from domestic equities.
The earnings that came for the quarter met Street estimates with a 9 per cent growth in cigarette volumes.
reported healthy growth across business segments. The company also sustained its ‘AA’ rating by MSCI-ESG, the highest amongst global tobacco companies, for the fourth successive year.
Foreign brokerages have largely remained positive on the stock post March quarter earnings, with their target prices suggesting up to 15 per cent upside for the stock over the next 12 months.
“We remain positive on ITC given compelling valuation with a backdrop of a K-shaped recovery for its FMCG business and a faster recovery for cigarettes. We see the stock rerating given business recovery with mobility and capital allocation concerns progressively being addressed and a strong ESG rating (cigarette business notwithstanding),” CLSA said while suggesting a 12-month target of Rs 310 on the scrip.
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JPMorgan upgraded its rating on the stock to outperform with a target of Rs 305.
“We believe the stock should do well in current volatile markets as a good defensive play with undemanding valuations. We expect FY23 to be a solid year for cigarette EBIT aided by healthy volume recovery and no material cost pressure. Other FMCG divisions should be able to navigate inflationary headwinds via prudent pricing, low demand elasticity (higher food salience) and sharp cost control,” it said.
Jefferies said while FMCG peers are seeing growth slowdown and raw material pressures, ITC is seeing a recovery in earnings, with good momentum across verticals and high margin visibility. Higher dividend payout and lower capex are also encouraging, it said, while suggesting a target of Rs 303 on the stock.
The FMCG giant reported a 11.80 per cent year-on-year (YoY) rise in standalone net profit at Rs 4,190.96 crore for March quarter on a 16.02 per cent YoY rise in revenues at Rs 16,426 crore.
Revenue from cigarette business grew 9.96 per cent YoY to Rs 6,443.37 crore. Non-cigarette FMCG revenue stood at Rs 4,141.97 crore, up 12.32 per cent YoY. The company’s hotel business posted a strong 35.39 per cent revenue growth. Revenue from agri business climbed 29.60 per cent, the company said.
Credit Suisse finds the stock Rs 315 worthy. It values the company’s cigarettes business at 18 times March 2024 earnings forecasts in line with global tobacco multiples.
“We value the FMCG business at 35 times FY24 EV/Ebitda in-line with consumer staples average,” it said.