The stock of FMCG major ITC Limited has acquired lustre in recent times. The shares climbed to their near 3-year highest levels to ₹ 282.35 apiece on 20th May 2022. In fact, ITC is the best performing stock in the Nifty 50 index with an increase of 21.61% on a year to date basis.

The share price of the company increased from ₹219.10 levels to ₹ 266.00 levels this year. ITC Limited has a 3.03% weightage in Nifty 50, as per April 29, data. 

“ITC share price is in a bull trend and it may further continue to rally in upcoming sessions in short term. It has recently given breakout at ₹255 levels on closing basis. So, those who have this stock in their portfolio are advised to hold the stock for short term target of ₹320 whereas fresh buyers may also enter at current levels,” said Mudit Goel, Senior Research Analyst at SMC Global Securities. He added that the shares may continue to rally.

The shares are riding on strong quarterly numbers fueled by robust growth in cigarette volumes. Experts expect that improved mobility and the easing of covid restrictions would help sales of cigarettes. 

ITC limited reported a 12% increase in its revenue from ₹ 3,755 crores a year ago to ₹ 4,195 crores for the January to March quarter. Its revenue from operations increased by 15% to ₹ 17,754 crores in the recent quarter, as compared to ₹ 15,404 crores during the same quarter last year.

“ITC delivered a solid performance with another quarter of robust growth in cigarette volumes (around 9%) which surpassed pre-Covid levels and now seems on a 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% growth) and paperboards (32%) businesses on a high base,” as per a report from ICICI Securities.

What do analysts say about ITC Limited’s shares?

In general, analysts say that the valuations of ITCs stocks are reasonable. Further, the company’s vast exposure to the cigarette business also means that it is relatively better placed amid the sharp inflationary pressures, as compared to many other consumer companies.

“ITC offers a combination of reasonable valuations, healthy dividend yield, and double-digit earnings growth over FY2022-24E led by a recovery in cigarettes, hotels and steady/healthy performance in FMCG and paperboards,” as per a report published by Kotak Institutional Equities on 19th May.

However, the shares of the company have been under the sell-off heat after the announcement of the final dividend of ₹ 6.25 per share for the financial year 2021-22.  However, stock market experts see this as an opportunity to buy and accumulate ITC’s shares for the long term.

“ITC is a diversified company which has remained sideways for long due to Covid restrictions. However, the unlock theme is going to push this stock now and the stock has given signs of coming out of consolidation after giving a breakout above ₹252 levels on a closing basis in recent sessions. So, one should accumulate ITC shares maintaining stop loss at ₹244 for 12 months target of ₹320 to ₹340 levels,” said Ravi Singhal from GCL Securities.

He added that fresh investors can buy ITC for the long-term at current levels, maintaining a stop loss at ₹ 244 for a 12-month target of ₹ 320 to ₹ 340 per share level.

Edelweiss believes that ITC’s share price may go up to ₹450 levels as it expects the company’s EBITDA Margins to scale up to higher single digits and the hotel, paperboard and agri-commodities business to revive. It has a buy call on the shares with a target of ₹450 and a stop loss of ₹ 220 apiece. This implies an upside of 69.17%.

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