ITC shares underperformed benchmark indices in 2024; more pain ahead?

Shares of ITC Ltd have underperformed its benchmark Sensex and BSE FMCG indices in 2024. While ITC stock is down 1.90%, Sensex has gained 11.75% this year. With a marginal gain of 0.09%, the BSE FMCG index managed to beat its constituent ITC during the same period.

However, ITC stock hit its 52 week high of Rs 528.55 on September 27, 2024. It's down 13.25% since then. It will be interesting to see whether tepid show by the FMCG stock in 2024 and in a year (0.60% returns) will impact investors' outlook toward the FMCG major.

Mileen Vasudeo, Senior Technical Analyst at Arihant Capital Markets has a buy call on the stock with a target price of Rs 510-530. Stop Loss can be fixed at Rs 450.

"We are observing that prices of ITC have taken support at the 200-days SMA at Rs 259 and have bounced from those levels on the daily charts. At present, the stock is underperforming the benchmark indices. However, the momentum indicator RSI is positively poised. Hence, one can buy the stock at current levels with a stop loss of Rs 450 for a target of Rs 510-530 levels in a couple of weeks," said Vasudeo.

Brokerage Macquarie has a price target of Rs 560 on the ITC stock with an outperform call.

Currently, cigarettes attract 28% GST rate & a compensation cess of 5-36% based on length of cigarette with longest cigarette attracting 36%.

Macquarie said if this levy of a special rate is over and above the existing compensation cess, the brokerage believes ITC will need at least a high single digit price hike to offset this tax increase.

ITC stock is the preferred pick of the ICICI Securities.

"Cigarettes volume growth trajectory continues to be stable at 3% despite calibrated price hikes to navigate cost inflation and consumer demand being under pressure. ITC continues to benefit from market share gains for organised players from the illicit cigarettes industry due to: 1) strong deterrent actions by enforcement agencies, leading to significant increase in seizures of illicit cigarettes; and 2) stability in taxes on cigarettes. FMCG had a resilient performance while margins are under pressure due to commodity inflation," said the brokerage.

In the current session, ITC stock was trdaing on a flat note at Rs 457.95 against the previous close of Rs 460.90 on BSE.Total 0.43 lakh shares of the FMCG firm changed hands amounting to a turnover of Rs 1.95 crore. Market cap of the firm stood at Rs 5.71 lakh crore.

ITC stock has a one-year beta of 0.6, indicating very low volatility during the period. In terms of technicals, the relative strength index (RSI) of ITC stock stands at 35.1, signaling it's trading neither in the oversold nor in the overbought zone. ITC shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day and 200 day moving averages.

ITC clocked a 3.1% year-on-year (YoY) rise in net profit for the second quarter of the FY25 at Rs 5,078.3 crore compared to Rs 4,927 crore, in the same quarter last year. Total revenue for the July-September quarter was at Rs 19,327.8 crore, up 16.8 percent YoY from Rs 16,550 crore in the year-ago quarter driven by agri business and hotels, the company said in a regulatory filing.