ITC shares slip 6% post Q2 earnings, here's what brokerages say

Shares of ITC Limited declined by 6 per cent to hit an intraday low of Rs 224.05 on the Bombay Stock Exchange (BSE) after the company posted its earnings for the quarter ended September 2021.   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 stock ended 5.54 per cent lower at Rs 225.20 against the previous close of Rs 238.40 on BSE. With a market capitalisation of more than Rs 2,77,000 crore, the shares stand higher than 100-day and 200-day moving averages but lower than 5-day, 20-day, and 50-day moving averages.   The large-cap stock has gained 36 per cent in the last one year and has risen 8 per cent since the beginning of this year.   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.   According to a report by Dolat Capital, ITC’s Q2 FY22 revenue and PAT were in line with their estimates, while EBITDA was ahead of estimates. The research firm has increased the FY22E EPS estimates to Rs 12.3 (+3.1 per cent) and has maintained FY23E EPS at Rs 13.4.   "We have also introduced FY24E EPS at Rs 14.4. Though the stock is trading at a steep discount to FMCG peers, we believe that the stock would remain under pressure as volume performance remains subdued," it added.   Prabhudas Lilladher in its report said ITC reported a smart recovery in the cigarette business led by fast recovery across states and segments even as FMCG business suffered due to a high base and higher input costs. ITC is focusing on innovations and distribution expansion across FMCG and cigarettes which should bode well in the coming years.   "The near term outlook seems mixed with improved outlook in cigarettes, strong growth and margin outlook in paper board, rising occupancy and EBIDTA positive in hotels and steady leaf tobacco prices and benefits of currency depreciation," it added.   According to Sharekhan, strong earnings visibility with improving growth prospects of the core cigarettes business, margin expansion in the non-cigarette FMCG business, and high cash-generation ability with strong dividend payout will reduce the valuation gap in the coming years.