ITC shares recover 86% from 52-week low; trading in overbought zone

Shares of FMCG major ITC approached their 52-week high today after Goldman Sachs maintained a buy call for the FMCG major. Goldman Sachs sees ITC shares at Rs 450 in a year. Shares of ITC rose to Rs 385.90 today amid a positive market sentiment today. They were trading 0.83% away from 52-week high of Rs 388.2 hit on February 6, 2023. ITC stock has been trading in the green for last four sessions. Shares of ITC have gained 76.52 per cent in a year and risen 16.09% this year.

Total 1.20 lakh shares of the FMCG firm changed hands amounting to a turnover of Rs 4.61 crore on BSE. Market cap of the firm rose to Rs 4.77 lakh crore. ITC stock has gained 86.42 per cent from the 52-week low of Rs 207, touched on February 24, 2022.

In terms of technicals, the relative strength index (RSI) of ITC stock stands at 70.2, signaling it's trading in the overbought zone. ITC stock has a one-year beta of 0.6, indicating very low volatility during the period. ITC shares are trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

Goldman Sachs said, "FMCG business has a significant contribution to ITC's EBIT. Capital allocation has improved resulting in 85% PAT to FCF conversion. ITC's PE is in-line with the 15-year average despite the improvements. ITC's premium over global tobacco peers in-line with history."

The global investment bank highlighted that the valuations still trade at a steep discount to India FMCG despite being comparable.

BNP Paribas India expects ITC stock to hit the target of Rs 400.

"Our target price is based on SOTP. Downside risks are: Steep increase in taxation on cigarettes and higher than expected increase in raw material costs," the brokerage said.

KR Choksey has raised its target price Rs 442 in a year. In a report dated February 10 this year, the brokerage said, “We value ITC shares using the SOTP (Sum of the parts) approach applying 12.5x EV/EBITDA on the FY25E EBITDA of Cigarette business; 15.8x EV/EBITDA on the FY25E EBITDA of Hotels business; 7.3x EV/EBITDA on FY25E EBITDA of Agri business; 5.2x EV/EBITDA on FY25E EBITDA of Paper business and 7.8x EV/Revenue on FY25E Revenue of FMCG business - we increase our target price to Rs 442 per share (previously INR 400); an upside of 17.8% over the CMP. Accordingly, we maintain our ‘BUY’ rating on ITC Ltd shares.”

In a report dated February 7, 2023, BOB Capital Markets assigned a target of Rs 459 for the ITC stock.

“Q3 revenue grew 3.5% YoY and gross margin expanded 700bps driven by a strong performance across categories. FMCG business delivered strong, sustained growth with double-digit segmental EBITDA margin. We assume coverage with BUY and a target price of Rs 459, offering 20% upside,” said BOB Capital Markets .

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