Meme fav ITC stock on a roll! Brokerages see more upside 

Shares of ITC are on a roll after the company posted better than expected numbers for the quarter ended March 2022. Experts say that good growth in cigarettes and other segments. 

On Thursday, the shares of FMCG-cigarette-to-hotel major ITC zoomed over 4 per cent to hit a high of Rs 279.15. It rose 2 per cent to hit a new 52-week high of Rs 282.3 on BSE on Friday. 

With a market capitalisation of more than Rs 3,44,000 crore, the shares are trading higher than 5-day, 20-day, 50-day, 100-day and 200-day moving averages. 

"With strong performance in FY22, we have increased earnings and retain BUY, with a revised DCF-based target price of Rs 351 (implying 23.6x FY24E EPS)," said Centrum Broking. 

It believes benign tax ruling, coupled with new products driving Cigarette volumes; Ecommerce ramp-up could provide tailwinds for FMCG business, yet widening distribution, and supply chain optimization coupled with smart manufacturing optimizing costs are key positives. 

Axis Securities has slightly revised (upwards) the FY22-24E target for Revenue/EBITDA/PATas it believes that with a stable taxation regime, ITC is poised to farewell. 

"We also remain positive on the cigarette recovery (back to pre-COVID level on an exit basis) and the structural uptick in the FMCG revenue/margin and recovery in the Hotels and Paper and Paperboard divisions," it said. 

"Benign taxation, inexpensive valuations (20x FY24E EPS), and 5 per cent dividend yield makes us buyers of the stock. Our target price is revised to Rs 295 (earlier Rs 280). Key Risks to our call include regulatory announcements to curb cigarette consumption cess in GST meeting, the resurgence of COVID cases, and inflation," the brokerage firm added. 

HDFC Securities continues to remain positive on ITC, especially with the economy moving towards normalcy. Further, the absence of a tax increase on cigarette in Budget 2022 also gives confidence in sustaining cigarette volume growth, it said. 

We maintain our EPS estimates for FY23/24. We value ITC on an SoTP basis to derive a target price of INR 285 (implied P/E of 20x Mar-24E EPS). Maintain BUY. In the sublime performance of other FMCG companies, ITC’s outperformance will remain a key for stock rerating. 

Yes Securities said that ITC delivered a solid performance with another quarter of robust growth in cigarette volumes (~9%) which surpassed pre-Covid levels and now seems on growth trajectory, a steady 12% growth in FMCG business despite a high base with sequential improvement in margins, hotels business turning around and above expected growth in both the Agri (29 per cent growth) and paperboards (32 per cent growth) businesses on a high base. 

The brokerage firm added that the FMCG business is growing well with acquisitions supporting the organic growth and margins moving up with scale. In other businesses, capital allocation concerns are being addressed with the peak capex cycle behind us, while the IT business can be another key value driver. 

"We reiterate our BUY rating citing inexpensive valuations and a strong dividend yield with a target price of Rs 308," it said.