ITC only Sensex stock in green as share price jumps 4% after Q4 profit beats estimates; should you buy now?

ITC share price jumped 4.8% to hit an intraday high of Rs 279 on Thursday after the company reported 11.7% on-year growth in consolidated net profit at Rs 4,196 crore, beating Street estimates.

ITC's scrip on BSE closed 3.43% higher at Rs 275.65 apiece on Thrusday, when benchmark Sensex dived 1,416.30 points or 2.61%.

ITC share price jumped 4.8% to hit an intraday high of Rs 279 on Thursday after the company reported 11.7% on-year growth in consolidated net profit at Rs 4,196 crore, beating Street estimates. Consolidated revenue for the largest cigarette maker in India rose 15.3% on-year to Rs 17,754 crore. So far this year, ITC shares have rallied over 25% and analysts see up to 20% further upside going forward, given that stable taxation on cigarettes is expected to drive volumes. Additionally, recent spurt in global agri prices is also likely to aid growth. “We estimate EBIT growth to be comfortably in double-digit. We see potential for the stock to reverse the long period of lacklustre performance,” said JM Financial Services in its note.

Stock talk: Should you buy, hold or sell ITC shares?

Prabhudas Lilladher: Buy
Target price: Rs 305; Upside: 14%

ITC posted resilient performance with 8.75% cigarette volume growth and margin expansion across cigarettes, paperboard and FMCG business. Hotels improved but still remain in the red. According to analysts at Prabhudas Lilladher, near term outlook remains positive given, positive cigarette volume traction considering stable tax regime; strong pricing and benefits of backward integration in paperboard; benefits of supply chain disruption in leaf tobacco and strong wheat exports; gradually improving occupancy levels in hotels; and, sustained growth across core segments in FMCG with steady margin expansion. While the brokerage expects near term margin pressure in FMCG, strong traction in other businesses is expected to enable ITC to sustain double digit profit growth. it maintains a ‘buy’ rating on the stock with a revised target price of Rs 305, up from Rs 285 earlier.

Sharekhan: Buy
Target price: Rs 320; Upside: 20%

According to analysts at Sharekhan, cigarette sales volume are expected to improve in coming quarters. ITC has enhanced focus and redefined growth strategies for all business verticals to improve prospects in the medium to long term. “Strong earnings visibility with improving prospects of core cigarette business, margin expansion in non-cigarette FMCG business and a high cash generation ability with strong dividend payout (dividend yield of 4.3% in FY22) will reduce valuation gap in coming years,” they said. The brokerage maintains ‘buy’ call on the stock with a revised price target of Rs 320.

ICICI Direct: Buy
Target price: Rs 310; Upside: 16%

ITC is the biggest cigarettes & second largest FMCG company in India with around 78% of market share in cigarettes & presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. ITC’s share price has underperformed the FMCG index with negative 6.8% return (from Rs 286 in May 2017 to Rs 267 in May 2022). The brokerage expects cigarette volumes, price growth in FMCG business & strong agri exports to drive revenues for the company in future. It upgraded the stock rating from ‘Hold’ to ‘Buy’. “We value the stock at Rs 310 on SOTP basis valuing cigarettes business 15x FY24 earnings & FMCG business 6x FY24 sales,” it said.

Motilal Oswal: Neutral
Target price: Rs 265

The domestic brokerage firm believes that in the ongoing environment where material cost inflation is a worry, ITC’s resilient Cigarette margins render relatively better near-term visibility versus its peers. “Longer term re-rating though will depend on diversification from cigarettes (81% of FY22 EBIT) and whether sustained earnings growth returns to the late-teen levels seen in the first half of the last decade. We value ITC at a 15% premium to the global cigarette peer average, targeting 17x FY24E EPS, to arrive at our TP of Rs 265,” it said. The brokerage maintains ‘Neutral’ on the stock.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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