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ITC shares gain 4% on strong Q4 earnings, here's what brokerages expect

Share price of ITC climbed 4.1% to Rs 203.1 against previous close of Rs 195.10 on BSE

twitter-logoBusinessToday.In | June 29, 2020 | Updated 13:58 IST
ITC shares gain 4% on strong Q4 earnings, here's what brokerages expect
ITC stock opened with a gain of 4.1% at Rs 203.10 today

ITC share price rose over 4% on Monday after the firm reported a 9.28 per cent rise in its consolidated net profit for fourth quarter ended March 31.  Share price of ITC climbed 4.1% to Rs 203.1 against previous close of Rs 195.10 on BSE.

The stock opened with a gain of 4.1% at Rs 203.10 today.  The share trades higher than 5 day, 20 day, 50 day and 100 day moving averages but lower than 200 day moving averages. Market cap of the firm rose to Rs 2.45 lakh crore. The large cap stock has lost 27.23% in one year and fallen 16.12% since the beginning of this year.

Total 18.38 lakh shares changed hands amounting to turnover of Rs 36.75 crore on BSE.

ITC's consolidated net profit to  rose to Rs 3,926.46 crore for the fourth quarter ended March 31 against net profit of Rs 3,592.80 crore during the January-March quarter of the previous fiscal.

However, revenue fell 4.93 per cent to Rs 12,560.64 crore during the quarter under review against Rs 13,212.19 crore in the corresponding period previous fiscal.

Total expenses stood at Rs 8,484.93 crore in Q4 of FY 2019-20, down 3.14 per cent against Rs 8,760.36 crore. On Friday, ITC share closed at Rs 195.10 on BSE, down 3.54 per cent from previous close.

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What brokerages expect

Brokerage Jefferies is bullish on ITC stock  and said decline in cigarette volume in Q4 stood at 10% which appears good amid the Covid 19 lockdown.

Jefferies believes cigarette business is on course to hit near pre-Covid levels, although 1QFY21 would be a washout It has given a buy call on the stock with target price of Rs 240.

Credit Suisse said the firm increased dividend payout ratio to over 80%. Key risk to the stock is an increase in cigarette GST cessation due to tough fiscal situation for government. Post lockdown, trends are reassuring for cigarettes business, the brokerage said, adding, FMCG business was on a strong trajectory.  The brokerage gave a neutral call on the stock with a target price of Rs 205.

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Macquarie said recovery in cigarette volume has been strong, with June-20 run-rate at 85-90% pre COVID-levels FMCG business can be an outperformer among peers in FY21. Dividend yield is now greater than 5%. The brokerage gave target price of Rs 232 for the stock.

Edelweiss Research has maintained hold call on the ITC stock. "While the cigarette opportunity in India remains attractive given per capita consumption at 1/18th of China's, investing modalities have changed with ESG assuming a more significant role. Steep tax hike and COVID-19- induced lockdown in March end led to cigarette volume falling 9-10% YoY (base of 7.5% YoY). We maintain 'HOLD/SU' with a TP of INR220. The stock is trading at 14.6x FY22E EPS," the brokerage said.

CLSA said navigating near-term demand challenges in its core will be critical. Capturing its FY20 results and adjusting our capex estimates, our earnings estimates see minor cuts in 21-22CL. The brokerage has a target price of Rs 220.

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