ITC share price gained nearly 1% to touch an intraday high of Rs 457.40 on NSE today (August 16) after the company reported its Q1 results and approved the demerger of its hotels business. So far this year, ITC shares have rallied more than 35%, delivering multibagger returns.
ITC reported a 17.58% YoY rise in standalone net profit at Rs 4,902.74 crore for the June quarter compared with Rs 4,169.38 crore in the same quarter last year. Revenue for Q1FY24 came in at Rs 16,995.40 crore, down 7.23% YoY over Rs 18,320.16 crore in the same quarter last year.
ITC board of directors also approved the demerger of its Hotels business under a scheme of arrangement amongst ITC Ltd and ITC Hotels Ltd. According to the share entitlement ratio fixed by the company, for every 10 shares held in ITC, shareholders will get 1 share of ITC Hotel.
According to share market analysts, ITC stock could take a breather in the short term after the recent rally. Analysts suggested targets for the stock in the Rs 450-560 range. The target prices suggest a flattish to 22% potential return going ahead.
ITC's core business performance remains healthy, outperforming other FMCG peers, said HDFC Institutional Equities. But the recent stock run-up limits further rerating potential, the brokerage said while suggesting a target price of Rs 450.
ITC stock could take a breather in the near term, said JM Financial Services. This brokerage, however, sees a potential re-rating on the cards, given a sharper capital-allocation strategy. ITC’s Q1 earnings did not carry the same kind of excitement that was visible in the past few quarterly results, this brokerage said while suggesting a target of Rs 555 on the stock.
Brokerage firm Prabhudas Lilladher said ITC Hotels demerger is likely to be completed over the next 15 months and will improve ROCE and cash flows. It finds ITC share worth Rs 478. Meanwhile, Axis Securities values the FMCG stock at Rs 540. It said growth in cigarette volume was stable, FMCG business reached the inflection point and that the demerger of Hotel’s business will strengthen ITC’s balance sheet and improve return ratios.
Antique Stock Broking, which has a target of Rs 500 on the stock, said ITC’s operational performance was strong on the back of 13% growth in cigarettes and 16% growth in FMCG business. "We remain positive on ITC on sustained momentum in cigarettes, improving the performance of FMCG, and other businesses. We maintain BUY recommendation," Antique said.
Motilal Oswal finds the stock worth Rs 535. It said ITC has demonstrated healthy 23.5% EPS growth in FY23 and that it expects an EPS CAGR of 14% over the next two years. "At a time when uncertainty looms over the industry, ITC's recovery in Cigarette volumes offer decent earnings visibility at reasonable valuations and attractive dividend yield. We maintain our BUY rating with a target of Rs 535, based on 28 times FY25E EPS," it said.
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