ICICI Securities bullish on this meme favourite stock! Here's why

 Brokerage firm ICICI Securities is bullish on meme favourite ITC Limited. It said that its time to add this FMCG major as macro and micro factors are now turning favourable.   The shares of India's second-largest FMCG company have not been able to deliver a good return in the last few months but have surely taught the important art of patience to all its shareholders.   The stock ended 0.20 lower at Rs 220.35 against the previous close of Rs 220.80. With a market capitalisation of more than Rs 2,71,000 crore, the shares stand higher than 20 day and 200 day moving averages but lower than 5 day, 50 day and 100 day moving averages.   The large-cap stock hit a 52-week high of Rs 265.30 on October 18, 2021, and a 52-week low of Rs 199.10 on May 4, 2021. Currently, it is trading 10.5 per cent above its 52-week low and 17 per cent below its 52-week high.   ICICI Securities expects ITC to benefit from the expectation of value (on current FCF profile basis) to outperform growth/expensive basket, potential price hikes in cigarettes in the current inflationary environment (better consumer acceptance likely), good underlying performance in the FMCG business along with higher profit (& EVA) focus, and improving outlook for the hotels business (likely cyclical upturn).   "We see potential market share gains in cigarettes, FMCG scale-up and profitability improvement to continue and potential to accelerate cost savings through a supply chain recast," it added.   The brokerage firm noted that recent media reports indicate that the government panel (formed to decide on the future taxation policy for tobacco) is suggesting ways to tax tobacco (not just cigarettes).   "While near-term volume/profitability trajectory may be sensitive to this outcome, we believe a rational policy can provide some certainty in the medium-term," it said in its report.   "Our earnings estimates are unchanged. We maintain 'ADD' with a DCF-based target price of Rs 250. At our target price, the stock will trade at 18x P/E multiple Mar’23E. The key downside risk is tax hikes much ahead of inflation leading to volume pressure (on cigarettes)," ICICI Securities added.   ITC reported a 13.7 per cent year-on-year (YoY) rise in net profit for the quarter ended September 2021 at Rs 3,697 crore on the back of a strong pick up across all operating segments after severe disruptions in the preceding June quarter.   The company's net revenue grew 11.2 per cent to Rs 12,543 crore, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 12.9 per cent to Rs 4,615 crore.