A ‘Blue Chip’ stock refers to a stock that is issued by financially sound and well-established companies along with a great reputation. Normally, such companies have years of operating history and consistent dividend payouts to their beneficiaries.
Listed below is one such Blue Chip stock that gets a ‘Buy’ call from Motilal Oswal, one of the well-known Brokerage firms based in India, having a potential upside of more than 15 percent:
ITC Limited
With a market capitalization of Rs 5.70 lakh crores, the stocks of ITC Limited started their trading session on Friday at Rs 462.25 and currently trades at Rs 456.65, slipping around 0.80 percent compared to the previous closing levels of Rs 460.15 apiece. It has a high dividend yield of approximately 3.40 percent.
The recent financial quarter, i.e., the June-September quarter has been a highly performing one as far as the operating revenues are concerned. The company’s net profits, on a contrasting note, showed a dip in numbers.
The former witnessed a jump from Rs 18,639.48 crores during Q1FY23-24 to Rs 19,270.02 crores during Q2FY23-24, and, the latter, due to increased cost pressure, moved down from Rs 5,180.12 crores to Rs 4,955.9 crores.
Despite the dip in bottom-line numbers, the company reported an increase in its profitability metrics with the return on equity (RoE) increasing from 25.89 percent during FY21-22 to 30.07 percent during FY22-23. Similarly, the return on capital employed (RoCE), during the same period, rose from 33.87 percent to 39.49 percent.
Motilal Oswal, one of the well-known brokerage houses across India, has given a ‘Buy’ rating to ITC Limited with a target price of Rs 535 indicating a potential upside of approximately 17 percent from the current stock price level.
The Brokerage mentioned the rationale for the above recommendation pertains to a balanced revenue stream, viz, from non-cigarette businesses, cost optimization, productivity enhancement, omni-channel network strengthening, aggressive capex plans, etc.
As per the latest presentations, the company’s segmental revenue, during Q2FY24, portrays a majority of contribution from the ‘Fast Moving Consumer Goods (FMCG) business, viz, of Rs 12,949 crores out of the total gross revenue of Rs 17,549 crores.
According to the latest shareholding pattern data available for the quarter ended September 2023, Foreign Institutional Investors (FIIs) hold a 43.34 percent stake in the company followed by Domestic Institutional Investors (DIIs) holding another major chunk of 41.97 percent.
ITC Limited is an Indian conglomerate primarily operating in the consumer goods space. Generating the majority of its revenue from operations within India, the company operates in four main business segments, i.e., FMCG, Hotels, Paperboards, and Agri-Business.
Written by Amit Madnani
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