With a market capitalization of ₹ 4,74,464 crores, ITC is a large-cap company and the largest cigarette manufacturer and seller in India. Currently, it operates in five businesses FMCG cigarettes, FMCG others, hotels, paperboards, paper and packaging, and agribusiness.
The company’s shares have been on an uptrend and have gained 72.66% in the past year, as their share price increased from ₹ 222.75 to ₹ 384.55 apiece.
ITC’s management said that volume stability in taxes on cigarettes backed by deterrent actions by enforcement agencies continued to enable volume recovery for the legal cigarette industry from illicit trade leading to higher demand for Indian tobacco.
In the October to December quarter, ITC Limited reported a net profit of ₹ 5070.09 crores, up 23.09% as against ₹ 4118.80 crores reported in the same quarter last year. The company’s revenue increased by 3.57% to ₹ 19,020.65 crores in the latest quarter from ₹ 18365.8 crores. Brokerages see an upside of up to 17% on the shares of ITC
ICICI Securities
The brokerage believes that the cigarette segment is witnessing a strong 20-25% growth. Stable taxation over the last five years has led to volume recovery, specifically in the post-Covid period. It changed the FMCG major’s volume growth estimate from 13 per cent to 17 per cent in FY23E.
ICICI Securities added that ITC also benefited from strong growth in hotels, paperboard & FMCG businesses with significant improvement in margins due to strong hotel occupancies, higher pricing growth in paperboard & operating leverage in FMCG business. It has maintained a buy rating on the shares with a target price of ₹ 450 per share. This translates to an upside of 17.02% as compared to its current share price of ₹ 384.55.
JM Financial
JM Financial believes that the government is able to better appreciate the legal industry’s logic that a punitive taxation regime on legal cigarettes alone does not necessarily help control the use of tobacco in the country, but instead leads people to buy cigarettes from illegal channels instead of the tax-paid ones.
The brokerage has a buy call on the shares of ITC with a target price of ₹ 440. This target implies an upside of 14.42% compared to its current share price. The time period given by the analyst when ITC can reach the defined target is one year.
Written by Simran Bafna
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