ITC, one of the leading companies in the BSE Sensex, has emerged as one of the top gainers this year. Its stock has shown remarkable performance, making it an attractive option for investors looking at the medium to long term. The company’s consistent growth across various segments has contributed to its success. (ITC Surging with Bright Prospects)
ITC shares have surged 72% in the past year, outperforming the BSE FMCG index and Sensex. This performance continues a trend of outperformance over the past 14 years, with a remarkable comeback in 2022 and significant gains in 2023.
Market analysts and brokerage firms hold a positive outlook on ITC’s future and expect further growth in its stock value. This sentiment is supported by recent financial reports. In the fourth quarter of FY23, ITC reported a significant year-on-year growth of 22.7 percent in consolidated profit, amounting to ₹5,225.02 crore. Furthermore, the company witnessed a notable 7.3 percent YoY increase in revenue from operations, reaching ₹19,058.29 crore.
The consistent growth in profit and revenue highlights the company’s strong performance and its ability to adapt to changing market conditions. This growth can be attributed to several factors, including effective business strategies, product diversification, and market expansion.
ITC’s success is fueled by its diverse presence in FMCG, hospitality, paperboards, packaging, and agri-business, providing stability and resilience across sectors.
Additionally, ITC’s focus on sustainability and corporate social responsibility has garnered positive attention from investors and stakeholders. The company has undertaken initiatives to reduce its environmental impact, promote responsible sourcing, and support community development. Such efforts not only contribute to a positive brand image but also align with the growing demand for environmentally conscious and socially responsible businesses.
ITC’s Strong Distribution Network and Brand Presence Drive Success
(ITC Surging with Bright Prospects)
Furthermore, ITC’s strong distribution network and brand presence across India have played a crucial role in its success. The company has established a robust supply chain, allowing its products to reach a vast consumer base, both in urban and rural areas. ITC’s well-known brands, such as Aashirvaad, Sunfeast, and Bingo, have gained a loyal customer base, further strengthening its market position.
ITC’s stock market performance, growth, and diversified portfolio make it an attractive investment. Strong financials, positive outlook, and sustainability enhance its promise. Thorough research and professional advice are advised.
ITC, a prominent player in the FMCG sector, has showcased impressive financial performance in the recent quarter. ITC’s cigarette revenue rose by 13.7% YoY with a strong 12% volume growth. The FMCG segment achieved a record high EBIT margin of 10.1%, partly due to PLI incentives. However, the Paperboards segment experienced a slightly slower quarter, while the Hotels segment reported a strong performance.
Motilal Oswal Financial Services commends ITC’s resilient earnings despite industry uncertainties, acknowledging its exceptional performance in recent years.
Emkay Global Financial Services initiated coverage on ITC with a ‘buy’ recommendation and set a target price of ₹525, anticipating a 16% upside from the previous closing price of ₹453.50. This bullish stance by brokerage firms reflects their confidence in ITC’s ability to deliver favorable returns to investors.
The positive outlook on ITC stems from several key factors. ITC’s robust financial performance, with strong revenue growth and improved profitability, demonstrates its resilience in challenging market conditions. Additionally, ITC’s diverse product portfolio, encompassing various consumer goods categories, provides stability and resilience to its business. The company’s brands, including Aashirvaad, Sunfeast, and Bingo, enjoy a strong market presence and have garnered a loyal customer base, further contributing to its growth.
ITC: Government Incentives Drive FMCG Performance and Sustainability Commitment Powers Growth
Furthermore, the government’s PLI scheme has been instrumental in bolstering ITC’s performance in the FMCG segment. The incentives provided under this program have facilitated increased production and enhanced profitability, resulting in improved financial metrics for the company. (ITC Surging with Bright Prospects)
Apart from its FMCG segment, ITC’s other business verticals, such as Hotels, have also demonstrated resilience and delivered positive results. The strong performance of the Hotels segment reflects ITC’s ability to capitalize on opportunities in the hospitality industry.
ITC’s consistent focus on sustainability and corporate social responsibility has further elevated its reputation among investors. The company’s initiatives in environmental stewardship, responsible sourcing, and community development align with the growing demand for ethical and socially responsible businesses. This commitment not only enhances ITC’s brand value but also strengthens its long-term sustainability and resilience.
While ITC’s stock has already experienced significant growth, the positive sentiment among brokerage firms suggests that there is still room for further upside. Factors such as market conditions, industry dynamics, and regulatory changes can impact the stock’s performance. Consulting with financial advisors or experts can provide valuable insights to make informed investment choices.
ITC’s strong financial performance, FMCG presence, and positive recommendations point to a promising future. ITC positions itself for sustainable growth and shareholder value through its diverse portfolio and sustainability focus.
Emkay Global Financial Services, in their evaluation of ITC, adopts a sum-of-the-parts (SOTP) approach to determine the target price. They have arrived at a target price of ₹525 for Jun-24E (June 2024), employing various valuation metrics for different business segments within ITC.
Emkay highlights the significant contribution of ITC’s cigarette business, valuing it at around ₹240, accounting for 46% of the target price. Valuation based on P/E ratio of 21x Jun-25E EPS.
Emkay’s Valuation and Expectations: ITC’s FMCG Business, Revenue Growth, and Potential Unlocking
Emkay values ITC’s FMCG business at around ₹141, accounting for 27 percent of the target price. They determine this valuation using an EV/sales (enterprise value to sales) ratio of seven times Jun-25E sales. However, it is noteworthy that this valuation includes a 15 percent discount compared to the valuation of Indian FMCG peers. Emkay predicts a K-shaped recovery in the FMCG sector, with certain segments experiencing accelerated growth.
Emkay’s approach emphasizes segment-wise assessment and valuation for ITC to determine an accurate target price.
Target prices and valuations are dynamic, subject to market conditions and company performance. Exercise caution, seek multiple perspectives before making investment decisions. Seeking advice from financial advisors or conducting independent research can provide valuable insights into ITC’s business segment valuation and potential. (ITC Surging with Bright Prospects)
Emkay expects ITC’s non-cigarette businesses to achieve revenue growth, resulting in enhanced margins and reduced capital expenditure needs. This, in turn, will enhance the returns profile of the non-cigarette operations. Emkay values the paper and hotel businesses at 12 times and 22 times EBITDA for Jun-25E, respectively, and expects faster expansion in both sectors. Additionally, Emkay values the agri-business at three times EV/sales for Jun-25E.
The brokerage firm has observed a steady re-rating of ITC over the past year, with the diminishing impact of the COVID-19 pandemic. Emkay anticipates value unlocking as ITC explores alternate structures for its hotels and potentially for its infotech division as well.
Emkay highlights that the stock price-to-earnings ratio (PER) valuation is currently above its historical average forward PER for both the past five and ten years. This is attributed to strong business fundamentals and improved execution, which supports Emkay’s expectation of further re-rating in the stock.
ITC’s Potential: Value Unlocking, Caution Advised, and Analyst Insights
Emkay sees upside potential in ITC from margin-driven growth in the “other FMCG” segment and value unlocking through demerger or alternative capital structures. The brokerage firm acknowledges that ITC’s substantial capital expenditure in diversifying operations is expected to enhance the company’s future prospects.
ITC’s long-term potential is appealing, but caution is advised due to overbought conditions. Analysts suggest profit-taking and considering entry at lower levels.
In conclusion, Emkay Global Financial Services sees promising prospects for ITC’s non-cigarette businesses, anticipating revenue growth and improved margins. The potential for value unlocking through alternative structures and the company’s strong business fundamentals contribute to the positive outlook. Technical analysts caution against recent stock rally and overbought conditions, recommending caution and expert guidance before investing.
According to the statements provided by Gaggar and Patel, there are two potential scenarios for the stock of ITC:
Gaggar highlights a price-wise correction opportunity for investors to add ITC stock at around ₹433. This implies that the stock might experience a temporary decline in price before resuming its upward trend.
Patel suggests the possibility of a time-wise correction, where the stock consolidates within a range and indicators normalize.
“Negative Divergence Signals Profit Booking Potential, Analyst Recommends Optimal Entry and Exit Levels”
Furthermore, Patel highlights a negative divergence on a daily scale between the price action (which is making higher highs) and the Relative Strength Index (RSI) indicator (which is making lower highs). This negative divergence indicates a potential profit booking scenario, where investors might take profits from their positions. Patel suggests that the optimal price range to buy the stock would be around ₹430-435, with an expected upside target of ₹480. A stop loss at ₹410 on a daily closing basis is also recommended to manage potential downside risk.
Please note that the information provided is based on the statements made by Gaggar and Patel. Market conditions and stock behavior can change, so it’s important to conduct thorough research and analysis before making any investment decisions.