ITC shares hit 52-week high post Q1 earnings; time to buy, sell or hold?
ITC stock gained 2.96% to a fresh 52-week high of Rs 316.65 against the previous close of Rs 307.55 on BSE.
- Aug 2, 2022,
- Updated Aug 3, 2022 12:48 PM IST
Shares of FMCG major ITC rose nearly 3% amid a falling market today after the firm reported a 34% year-on-year rise in consolidated net profit for the quarter ended June 30, 2022.
ITC stock gained 2.96% to a fresh 52-week high of Rs 316.65 against the previous close of Rs 307.55 on BSE. Earnings were announced after market hours on August 1, 2022. ITC shares were trading higher than 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The large cap stock has gained 50.33 % in a year and risen 42.91% in 2022.
Total 10.96 lakh shares of the firm changed hands amounting to a turnover of Rs 34.26 crore on BSE.
Market cap of the firm rose to Rs 3.85 lakh crore.
The stock hit a 52-week low of Rs 204.50 on August 26, 2021. Net profit for Q1 came at Rs 4,390 crore, surging 34 per cent for the quarter ended June 30, 2022 against a net profit of Rs 3,276 crore in the year-ago period.
Sequentially, the net profit rose 4.6 per cent from Rs 4,196 crore in March quarter (Q4FY22). Revenue from operations for Q1 came at Rs 19,831.27 crore, rising 39 per cent in the June quarter against a revenue of Rs 14,240.76 crore in the corresponding period last year.
ALSO READ: ITC Q1 results: Consolidated net profit zooms 34% to Rs 4,390 cr, revenue up 39%
Total income stood at Rs 20,152 crore, rising 37 per cent against Rs 14,687. 80 crore in the corresponding quarter of the last fiscal.
Total expenses rose to Rs 14,201.51 crore compared with Rs 10,220.49 crore in the corresponding period of last fiscal.
During the first quarter, the cigarettes segment reported a revenue of Rs 7,464.10 crore as compared to Rs 5,802.67 crore in the same period last fiscal.
ALSO READ: ITC stock crosses Rs 300-mark for first time in 3 years; how far will it go?
Motilal Oswal has upgraded its stance to buy with a target price of Rs 355.
"As highlighted in our upgrade to Buy note as well as our FY22 annual report note, strong earnings momentum (16% EPS CAGR over FY22-24 compared to 5% in the preceding five years) is being led by good performance from cigarettes in a stable tax environment, healthy recovery in profitability for the hotels business, and continued good performance from FMCG-others. Unlike peers, pressure on material costs is far lower. Allied with better capital allocation and continued healthy dividend payout, the path towards high 20s or early 30s RoE is visible. We maintain our Buy rating," the financial services firm said.
CLSA has assigned an outperformed call to ITC and raised its target price to Rs 330.
"Strong recovery in revenue and margins in Q1 and cigarettes clocked a 25% volume growth. Margins were stable at 74%. Other FMCG staged healthy growth and stable margin. ITC remains preferred pick. Raise FY23-24CL earnings by 8% to capture recovery," said CLSA.
JPMorgan is overweight on the stock. Its target price has been raised to Rs 350.
"Q1 beat estimates and the company went firing on all cylinders. Cigarette EBIT growth came at 29% y/y led by volume recovery, share gains, and improved market mix. Non-FMCG divisions- Paper, Hotel & Agri- clocked highest ever quarterly revenue along with healthy EBIT growth."
Jitendra Upadhyay, senior Equity Research analyst, Bonanza Portfolio Management
"ITC's cigarette volumes crossed pre-covid levels supported by a normalizing macroeconomic situation and enhanced product availability. Annual consumer spend in FMCG crossed Rs 24000Cr with exporting to over 60 countries and products reaching 200mn households (versus 150mn in FY21). ITC delivered a resilient performance across all segments. Agri grew 29% YoY for the year, led by strong exports while paperboard also retained its leadership.ITC can comfortably pass any tax-hikes to customers by raising prices. Business recovery in Cigarette business has been better than expected while Hotel segment recovery is likely to be on time. ITC's cigarette business allows the company to have a consistent strong cash flow (FY17-22 FCF CAGR 12%, FY22 FCF Rs. 14,977Cr) which should continue to help FMCG business, good management, High Free cash flow yield, high dividend yield and strong business moat that gives confidence to call it a high conviction buy at inexpensive valuation."
Pavitraa Shetty, Co-founder & Trainer, Tips2Trades said, "Even though Q1FY23 earnings for ITC have been excellent and more importantly consistent, the stock might correct as the market has already factored in this result thereby creating a negative divergence on the charts. Investors are advised to book profits in ITC at current levels and should wait for a dip near Rs 280 to buy for higher targets in the coming months."
Tirthankar Das, Head of Technical Research, Ashika Group said, "The FMCG sector continues with its outperformance as the NSE FMCG index continues to form higher peak and higher trough in all time frame and in that space, ITC remains a clear outperformer. Recently, prices have registered a breakout of the 2.5-year old rising channel thus offering fresh entry opportunity. However, immediate resistance from the stock arises from the 78.2% retracement of the entire fall since 2017 (high:368; Low: 134) at around Rs 316- Rs 320 levels. On the oscillator front, no signs of exhaustion can be seen yet though trading in overbought price region. Hence, some amount of price consolidation at higher level can be expected amid the narrow range of Rs 300- Rs 320. Hence, for the trend follower, price sustenance above Rs 320 would continue to maintain positive biasness while for medium-term investors, a corrective dip towards Rs 290-Rs 300 should be used as an ideal buying opportunity to ride the next leg of up move towards Rs 340-Rs 350."
Ravi Singh, vice President and head of Research, Share India said, "ITC has delivered improved performance in Q1 taking cues from the demand recovery in cigarette and hotel business, cost optimization and trending sales momentum in FMGC sector. The stock on technical setup is also exhibiting bullish trend on daily chart. Investors may hold their positions for a target of Rs 325 levels in the coming sessions."
Nirvi Ashar, Manager Fundamental Research, Religare Broking said, "We are positive on the long term prospects of ITC, given its strong focus on innovation and premiumization as well as stable trends in taxes of cigarettes. Also, revival in demand and focus on value added products will continue to drive growth across other segments such as Agri, paperboards and hotels. In addition, ITC is a high dividend paying stock having a debt-free balance sheet with strong free cash flow as compared to its peers which is positive. On the valuation front, ITC is trading at a comfortable valuation and we have maintained a Buy rating with a target price of Rs 332."
Vinit Bolinjkar, Head of Research, Ventura Securities said, "ITC’s net profit and revenue growth has been strong with 38% and 41% growth YoY respectively and the management has indicated that there is an uptick in the consumer sentiments. However, it did raise a red flag as far as rural demand is concerned given inflationary pressure in the economy.
The cigarette division numbers were also strong with net profit and EBIT growth of 29% and 30% YoY respectively while volume growth was at staggering 25-26% YoY due to actions by enforcement agencies in seizing illicit cigarette. For the FMCG business, the EBITDA and revenue grew by 92% and 46% over pre COVID levels (Q1FY20).
With respect to hotels business, the revenues grew by 41.4% over pre COVID levels (Q1FY20) with ARR and Occupancy ahead of pre-pandemic levels driven by Retail (packages), Leisure, Weddings & MICE segments. For, the revenues grew by 82.7% YoY driven by wheat, rice and leaf tobacco exports.
The paperboards, paper and packaging Segment also delivered strong performance with revenues up 43.3% y-o-y.
Overall, the results were superior on all counts and we continue to have a bullish view on the stock."
Narendra Solanki, Head- Equity Research at Anand Rathi Shares & Stock Brokers said, "ITC delivered supreme performance across all operating segments in Q1FY23. Cigarette sales volume is expected to improve in the coming quarters. ITC has enhanced focus and redefined growth strategies for all its business verticals to improve growth prospects in the medium to long term. Solid dividend yield and cash flows coupled with receding capital allocation concerns should keep the sentiment positive on the stock.Company’s focus on strategic cost management schemes, innovation and judicious pricing action will tackle unprecedented input cost inflation. With a promising outlook, we remain positive on the stock for a long-term prospective."
Meanwhile, Sensex opened 170 pts lower at 57,945 and Nifty lost 42 pts to 17,297 in early trade today.
Shares of FMCG major ITC rose nearly 3% amid a falling market today after the firm reported a 34% year-on-year rise in consolidated net profit for the quarter ended June 30, 2022.
ITC stock gained 2.96% to a fresh 52-week high of Rs 316.65 against the previous close of Rs 307.55 on BSE. Earnings were announced after market hours on August 1, 2022. ITC shares were trading higher than 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The large cap stock has gained 50.33 % in a year and risen 42.91% in 2022.
Total 10.96 lakh shares of the firm changed hands amounting to a turnover of Rs 34.26 crore on BSE.
Market cap of the firm rose to Rs 3.85 lakh crore.
The stock hit a 52-week low of Rs 204.50 on August 26, 2021. Net profit for Q1 came at Rs 4,390 crore, surging 34 per cent for the quarter ended June 30, 2022 against a net profit of Rs 3,276 crore in the year-ago period.
Sequentially, the net profit rose 4.6 per cent from Rs 4,196 crore in March quarter (Q4FY22). Revenue from operations for Q1 came at Rs 19,831.27 crore, rising 39 per cent in the June quarter against a revenue of Rs 14,240.76 crore in the corresponding period last year.
ALSO READ: ITC Q1 results: Consolidated net profit zooms 34% to Rs 4,390 cr, revenue up 39%
Total income stood at Rs 20,152 crore, rising 37 per cent against Rs 14,687. 80 crore in the corresponding quarter of the last fiscal.
Total expenses rose to Rs 14,201.51 crore compared with Rs 10,220.49 crore in the corresponding period of last fiscal.
During the first quarter, the cigarettes segment reported a revenue of Rs 7,464.10 crore as compared to Rs 5,802.67 crore in the same period last fiscal.
ALSO READ: ITC stock crosses Rs 300-mark for first time in 3 years; how far will it go?
Motilal Oswal has upgraded its stance to buy with a target price of Rs 355.
"As highlighted in our upgrade to Buy note as well as our FY22 annual report note, strong earnings momentum (16% EPS CAGR over FY22-24 compared to 5% in the preceding five years) is being led by good performance from cigarettes in a stable tax environment, healthy recovery in profitability for the hotels business, and continued good performance from FMCG-others. Unlike peers, pressure on material costs is far lower. Allied with better capital allocation and continued healthy dividend payout, the path towards high 20s or early 30s RoE is visible. We maintain our Buy rating," the financial services firm said.
CLSA has assigned an outperformed call to ITC and raised its target price to Rs 330.
"Strong recovery in revenue and margins in Q1 and cigarettes clocked a 25% volume growth. Margins were stable at 74%. Other FMCG staged healthy growth and stable margin. ITC remains preferred pick. Raise FY23-24CL earnings by 8% to capture recovery," said CLSA.
JPMorgan is overweight on the stock. Its target price has been raised to Rs 350.
"Q1 beat estimates and the company went firing on all cylinders. Cigarette EBIT growth came at 29% y/y led by volume recovery, share gains, and improved market mix. Non-FMCG divisions- Paper, Hotel & Agri- clocked highest ever quarterly revenue along with healthy EBIT growth."
Jitendra Upadhyay, senior Equity Research analyst, Bonanza Portfolio Management
"ITC's cigarette volumes crossed pre-covid levels supported by a normalizing macroeconomic situation and enhanced product availability. Annual consumer spend in FMCG crossed Rs 24000Cr with exporting to over 60 countries and products reaching 200mn households (versus 150mn in FY21). ITC delivered a resilient performance across all segments. Agri grew 29% YoY for the year, led by strong exports while paperboard also retained its leadership.ITC can comfortably pass any tax-hikes to customers by raising prices. Business recovery in Cigarette business has been better than expected while Hotel segment recovery is likely to be on time. ITC's cigarette business allows the company to have a consistent strong cash flow (FY17-22 FCF CAGR 12%, FY22 FCF Rs. 14,977Cr) which should continue to help FMCG business, good management, High Free cash flow yield, high dividend yield and strong business moat that gives confidence to call it a high conviction buy at inexpensive valuation."
Pavitraa Shetty, Co-founder & Trainer, Tips2Trades said, "Even though Q1FY23 earnings for ITC have been excellent and more importantly consistent, the stock might correct as the market has already factored in this result thereby creating a negative divergence on the charts. Investors are advised to book profits in ITC at current levels and should wait for a dip near Rs 280 to buy for higher targets in the coming months."
Tirthankar Das, Head of Technical Research, Ashika Group said, "The FMCG sector continues with its outperformance as the NSE FMCG index continues to form higher peak and higher trough in all time frame and in that space, ITC remains a clear outperformer. Recently, prices have registered a breakout of the 2.5-year old rising channel thus offering fresh entry opportunity. However, immediate resistance from the stock arises from the 78.2% retracement of the entire fall since 2017 (high:368; Low: 134) at around Rs 316- Rs 320 levels. On the oscillator front, no signs of exhaustion can be seen yet though trading in overbought price region. Hence, some amount of price consolidation at higher level can be expected amid the narrow range of Rs 300- Rs 320. Hence, for the trend follower, price sustenance above Rs 320 would continue to maintain positive biasness while for medium-term investors, a corrective dip towards Rs 290-Rs 300 should be used as an ideal buying opportunity to ride the next leg of up move towards Rs 340-Rs 350."
Ravi Singh, vice President and head of Research, Share India said, "ITC has delivered improved performance in Q1 taking cues from the demand recovery in cigarette and hotel business, cost optimization and trending sales momentum in FMGC sector. The stock on technical setup is also exhibiting bullish trend on daily chart. Investors may hold their positions for a target of Rs 325 levels in the coming sessions."
Nirvi Ashar, Manager Fundamental Research, Religare Broking said, "We are positive on the long term prospects of ITC, given its strong focus on innovation and premiumization as well as stable trends in taxes of cigarettes. Also, revival in demand and focus on value added products will continue to drive growth across other segments such as Agri, paperboards and hotels. In addition, ITC is a high dividend paying stock having a debt-free balance sheet with strong free cash flow as compared to its peers which is positive. On the valuation front, ITC is trading at a comfortable valuation and we have maintained a Buy rating with a target price of Rs 332."
Vinit Bolinjkar, Head of Research, Ventura Securities said, "ITC’s net profit and revenue growth has been strong with 38% and 41% growth YoY respectively and the management has indicated that there is an uptick in the consumer sentiments. However, it did raise a red flag as far as rural demand is concerned given inflationary pressure in the economy.
The cigarette division numbers were also strong with net profit and EBIT growth of 29% and 30% YoY respectively while volume growth was at staggering 25-26% YoY due to actions by enforcement agencies in seizing illicit cigarette. For the FMCG business, the EBITDA and revenue grew by 92% and 46% over pre COVID levels (Q1FY20).
With respect to hotels business, the revenues grew by 41.4% over pre COVID levels (Q1FY20) with ARR and Occupancy ahead of pre-pandemic levels driven by Retail (packages), Leisure, Weddings & MICE segments. For, the revenues grew by 82.7% YoY driven by wheat, rice and leaf tobacco exports.
The paperboards, paper and packaging Segment also delivered strong performance with revenues up 43.3% y-o-y.
Overall, the results were superior on all counts and we continue to have a bullish view on the stock."
Narendra Solanki, Head- Equity Research at Anand Rathi Shares & Stock Brokers said, "ITC delivered supreme performance across all operating segments in Q1FY23. Cigarette sales volume is expected to improve in the coming quarters. ITC has enhanced focus and redefined growth strategies for all its business verticals to improve growth prospects in the medium to long term. Solid dividend yield and cash flows coupled with receding capital allocation concerns should keep the sentiment positive on the stock.Company’s focus on strategic cost management schemes, innovation and judicious pricing action will tackle unprecedented input cost inflation. With a promising outlook, we remain positive on the stock for a long-term prospective."
Meanwhile, Sensex opened 170 pts lower at 57,945 and Nifty lost 42 pts to 17,297 in early trade today.