shares of ITC Net profit for the January-March period jumped 12 per cent to Rs 4,195 crore after the FMCG major hit a 3-year high in early deals on Thursday, as against Rs 3,755 crore a year ago. The cigarette-to-hotel major’s stock hit its highest level since July 2019, when it hit an all-time high of Rs 282.95. at 09:44 am; ITC was up 3.8 per cent at Rs 276.50, compared to 2 per cent decline in S&P BSE Sensex, The counter witnessed huge trading volume with a combined 28.5 million equity shares changing hands on NSE and BSE.
The company attributed its performance to “strong” growth across all segments. The company said cigarettes had staged a broad-based recovery, surpassing pre-pandemic levels.
The company further said that the non-cigarette FMCG business, despite the unprecedented rise in prices of key inputs, performed well through focused cost management interventions across the value chain, premiumisation, product mix promotion and prudent pricing actions. In addition, the reopening of educational institutions helped the recovery of the education and stationery production business, although it was still below pre-pandemic levels.
“After remaining relatively low in the first half, the second half of the year (FY22) witnessed double-digit growth in revenue. Staples and convenience foods remained resilient even though the pace of revenue growth was seen on a relatively high basis,” the company said, adding that the discretionary/out-of-home categories posted strong growth, surpassing pre-pandemic levels, which is driven by progressive reform. Dynamics and favorable comparison.
The ITC Board recommended a final dividend of Rs 6.25 per share including an interim dividend of Rs 5.25 per share. The total dividend for FY22 is Rs 11.50 per share.
“In the current environment, where material cost inflation is a concern, ITC’s resilient cigarette margins present relatively better near-term visibility versus peers. Long-term re-rating however will depend on diversification from cigarettes (81 per cent of FY2222 EBIT) and whether there is sustained earnings growth at the teen levels seen in the first half of the last decade,” said Motilal Oswal Financial Services . Post result report.
Meanwhile, people at ICICI Securities said: ITC share price has underperformed FMCG index with negative 6.8 per cent returns (from Rs 286 in May 2017 to Rs 267 in May 2022). We expect cigarette volumes, increase in prices in FMCG business and strong agri exports to generate revenue for the company in future.
JP Morgan analysts have upgraded ITC shares to overweight with a March 2023 price target of Rs 305. “In our view ITC offers a good combination of earnings visibility, strong cash flow and high dividend yield for FY23. We believe that the stock should perform well in the current volatile markets as a good defensive play with no-demand valuations,” the note said.
“We largely retain our FY23/24e EPS estimates. While the FMCG counterparts are coping with growth slowdown and RM pressures, ITC’s earnings are improving, with good momentum and high margin visibility across all verticals. Higher dividend payouts and lower capital expenditures are also encouraging,” Jefferies said. It has retained buy rating on ITC shares with a target of Rs 305.
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