ITC share price tumbled more than 1.5% on Wednesday morning, a day after the cigarette to hospitality major held its first investor day meet. At the investor day, ITC’s management highlighted the growth initiatives taken across divisions and expressed hope of delivering double-digit growth ahead. ITC has not ruled out a demerger of verticals which has been seen as a positive by analysts. So far this year, ITC’s share price has jumped just 5.7%, underperforming the benchmark Nifty 50 index, which is up more than 20%. ITC share price hit an intraday low of Rs 224.7 per share, down 1.58%.
ICICI Direct – Add
Target price: 250
ICICI Direct said their earnings estimates remain unchanged. “Maintain ‘ADD’ with a DCF-based revised target price of Rs 250. At our target price, the stock will trade at 18x P/E multiple March 2023E,” they said. Key downside risk is tax hikes much ahead of inflation leading to volume pressure (on cigarettes) as price elasticity is still unfavorable. Analysts said that ICICI Direct has highlighted M&A as an incremental vector for growth.
Kotak Securities – Buy
Fair value – Rs 282
Analysts at Kotak Securities said that ITC’s management continues to examine value unlocking opportunities including demerger. ITC management said it has no buy-back plans at the current juncture with the focus firmly on growing dividends per share. “ To unlock value, the company is committed to an alternate structure for Hotels once industry stabilizes, is open to an Infotech IPO at the right time, and continues to evaluate all value-unlocking options in FMCG,” Kotak Securities said.
JM Financial – Buy
Target price – Rs 285
ITC is now far more nimble, aggressive and cost-focused, said JM Financial services in a report. “Overall, we believe building blocks are being put in place to drive sustained value-creation, and a c.5% dividend yield offers good support till market takes cognizance of the same,” they added.
Emkay Global – Buy
Target price – Rs 270
“ITC in its analyst meet highlighted its growth initiatives across divisions and is hopeful of delivering double-digit growth ahead,” Emkay Global noted. The brokerage firm added that ITC’s management seems open to acquisitions in FMCG/IT and exploring unlocking potential at an opportune time, which could be a positive catalyst for the stock in their view.
Motilal Oswal – Neutral
Target price – Rs 240
The brokerage firm believes that concerns surrounding the stock remain in play. These concerns include the heavy dependence on cigarette business, contributing 80% of ITC’s overall EBIT. Further tepid growth in the other FMCG segments remains. Motilal Oswal values ITC at 15x Dec’23E EPS.
Geojit Financial Services – Buy
“We have got more positive on the company, post the meet,” said Vinod Nair, Head of Research at Geojit Financial Services. “The company is actively pursuing acquisition opportunities in FMCG and IT businesses and has lined up an investment of Rs 10,000 crore over the next three years (35-40% in FMCG including cigarettes, 25-30% in Paper boards, 10% in Hotel business). Considering the long-term plans and rich cash position, the company is a decent value investment,” he added.