Diversified group ITC Ltd shares rallied over 7 per cent in early trade on Monday after it reported a better-than-expected 5.67 per cent increase in standalone net profit at Rs 2,495.20 crore for the fourth quarter ended March 31 against Rs 2,361.18 crore in the corresponding quarter a year ago.
At 9.40 am, shares of the company were trading 5.29 per cent up at Rs 347.40. The scrip opened at Rs 347.10 and has touched a high and low of Rs 354.75 and Rs 345.75, respectively, in trade so far. Shares of the company closed 5.29 per cent up at Rs 347.40.
Revenue from the total FMCG business including cigarettes increased 8.35 per cent to Rs 7,343.29 crore from Rs 6,777.21 crore in the corresponding quarter of 2014-15. During the quarter, revenue from cigarettes increased 10.17 per cent to Rs 4,639.17 crore from Rs 4,210.70 crore in the year-ago period although it continued to be impacted by illegal trade.
According to Sharekhan, ITC posted a much better operating performance in Q4FY2016 with some revival in the core cigarette business. With pressure easing off on the cigarette business and management’s thrust on expanding the non-cigarette FMCG business (by entering into newer categories), the brokerage house expect ITC to deliver double-digit earnings growth over the next two years. The stock is currently trading at 20.3x its FY2018E earnings, which is at stark discount to the valuation of some of the large-cap FMCG stocks. Thus, in view of better earnings visibility and discounted valuations, Sharekhan maintained ‘BUY’ recommendation on the stock with an unchanged price target of Rs 375.
The Kolkata-based company has also announced plans to issue one bonus share for every two existing ordinary shares.
Religare Institutional Research also retained ‘Buy’ on ITC with a March 2017 target price of Rs 370, valuing cigarettes and FMCG-others businesses at 23x forward P/E and 2x EV/sales respectively.
Net sales of the company were up 9.51 per cent at Rs 10,062.38 crore for the quarter under review as against Rs 9,188.25 crore in the previous fiscal, ITC said in a BSE filing.
Revenue from FMCG-Others segment was up 5.36 per cent to Rs 2,704.12 crore during January-March period as against Rs 2,566.51 crore last fiscal.
“FMCG-Cigarettes segment continues to be impacted by severe pressure on legal cigarette industry volumes even as illegal trade grows unabated,” said ITC.