Rise in ITC shares: ITC shares Ltd continued the uptrend in the opening session of Monday with the stock climbing to a 3-year high as it was up over 2 per cent to Rs 290 on the BSE, the highest level since 2019. ITC The stock is emerging as one of the top gainers among bluechips in the period, with a 30 per cent rise to its all-time high in 2022 against a 9 per cent fall in the benchmark Sensex, with market values of several companies falling. decline has been observed. Loss of appetite of investors towards riskier assets. Diversified Fast Moving Consumer Goods (FMCG) stock of the company was trading at its highest level since May 2019, and has gained 7 per cent in the last two trading days.
A stagnant tax environment for cigarettes in recent years has allowed ITC to check price increases to avoid a demand disruption. Analysts expect this trend to continue and result in improved cigarette volumes and earnings visibility over the medium term.
financial situation
For the January-March 2022 quarter (Q4FY22), ITC had posted strong results with cigarette volume growth at around 9 per cent. Cigarette segment bounced back with volumes surpassing pre-pandemic levels to strengthen market position through progressive normalization of economic activity and strategic portfolio interventions and enhance product availability backed by improved on-ground execution .
What should investors do?
Analysts said the company, which makes bingo chips and gold flake cigarettes, is becoming a major draw among investors as it is less affected by input cost inflation, has higher dividend yield, is growing consumer business and has strong growth prospects in the cigarette business. With this the hotel business is improving. which is its mainstay.
“More than 80% of gains come from cigarettes and it is one of the few stocks in the consumer sector that is relatively well insulated from commodity cost inflation,” said Gautam Duggad, head of research, Institutional Equities, Motilal Oswal Financial Services. “The cigarette business continues to improve and the stock is trading at a substantial discount in this sector despite strong payouts and free cash flow generation.”
Motilal Oswal Financial, which recently upgraded the stock to buy with a target price of Rs 335, said the stock is still at a discount of 27 per cent for January 2019 valuation with one-year forward earnings per share. Is trading at 25.4x.
While analysts at Prabhudas Lilladher believe there is short-term margin pressure in FMCG, strong traction in other businesses will enable ITC to sustain double-digit profit growth. The brokerage firm has raised its valuation of cigarettes from 15x to 16x on improved growth and stable taxation despite long-term risks. It has also assigned higher multiples for FMCG and paper business. Its target price is Rs 305 per share.
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