ITC shares hit Rs 400 level for the first time. What's next?

Shares of ITC crossed a major milestone, crossing the Rs 400 mark for the first time ever, rising 1.20 per cent in Monday’s trade. The FMCG major, which was a meme stock a year ago, surged nearly 80 per cent in the past 14 months. The FMCG firm has been showing growth in its top line and bottom line. For the nine-month period that ended December 31, 2022, ITC posted a 21.20 per cent year-on-year (YoY) rise in consolidated gross sales at Rs 57,027.40 crore. Net profit during the period jumped 27 per cent YoY to Rs 14,016.18 crore during the same period.

All the sectors from FMCG to hotels, paperboard to agriculture and tobacco also contributed to the performance of ITC. For instance, the consolidated revenue from FMCG business increased 21.11 per cent YoY to Rs 37,387.12 during April-December 2022. On the other hand, revenue from the hotel business increased 100 per cent YoY to Rs 1,880.40 in 9MFY23. Other businesses also witnessed stellar growth in the same period.

What to expect from ITC in Q4 results?

 

Nirmal Bang Securities believes that ITC may post 26 per cent year-on-year growth in profit after tax in Q4FY23 on a 4.7 per cent YoY rise in revenue.

“Cigarette sales are likely to grow by 16 per cent YoY, led by volume growth of 14 per cent YoY. We expect the growth momentum in other-FMCG business to continue, with around 19 per cent YoY growth in the segment. Further, we expect the hotels business to grow by 70 per cent YoY as mobility seems to be on the rise amid improvement in business travel sentiments and higher ARR,” Nirmal Bang Securities said in a report.

All eyes are on Q4 results of ITC as Managing Director Sanjiv Puri of late has also been talking about identifying new vectors of growth. Puri’s ITC Next strategy pivots around a multi-pronged approach to revitalise the company’s current FMCG portfolio.

What’s next for ITC?

Brokerage Sharekhan is bullish on ITC with a target price of Rs 450. “ITC has delivered a resilient performance in the past few quarters, despite an uncertain demand environment and sustained inflationary pressures on margins. The resilient performance was driven by a good recovery in its core cigarette business (in the post-Covid era), steady double-digit growth in the non-cigarette FMCG business, and accelerated growth in the hotel and paperboard, paper and packaging (PPP) business,” Sharekhan said.

Motilal Oswal Financial Services in March also set a target price of Rs 450 for ITC. “As consumer companies continue to struggle in an uncertain operating environment, ITC is better placed than peers with accelerated earnings growth over the past two years, especially in FY23, and strong earnings visibility compared to peers into FY24 as well,” the brokerage said.

 

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