ITC’s shares reached a three-year high of Rs 293.45 a share on Tuesday, up more than 0.5 percent on the BSE intraday mostly due to a positive outlook for the company’s business. On the BSE, the stock has soared over 8% after soaring for a third straight session today.
According to Edelweiss Research, the normalizing macroeconomic environment and improved product availability helped ITC’s cigarette volumes surpass pre-covid levels in H2FY22. Additionally, with items reaching almost 200 million households, annual consumer spending on FMCG products exceeded Rs 240 billion.
The FMCG major has demonstrated resiliency in all of its business segments, with the agricultural segment rising by 29% YoY for the year, driven by robust exports, and paperboard maintaining its leadership.
According to brokerage, ITC saw strong results across all segments, with cigarettes and FMCG expanding their customer bases and expanding their product offerings in FY22. Given that there won’t be a tax increase for a second straight year in FY23, legal cigarette players are predicted to overtake illegal cigarette players in terms of market share.
Additionally, compared to other forms of spending, cigarettes are more affordable, according to research by Edelweiss. Most other sources of consumption have witnessed an inflation rate of 10–20%. It went on to say that ITC’s hotel division would experience a robust recovery in FY23E, notwithstanding a modest challenge posed by Sri Lanka’s protracted financial crisis.
The firm kept its Buy rating and increased target price of Rs 340 per share, representing a gain of 16% from Monday’s closing price, as it carried forward the value to Dec-23E.
Decoding ITC’s FY22 annual report, KR Choksey Research values ITC shares using the SOTP (Sum of the Parts) approach, implying EV/EBITDA multiples of 12.2x for the cigarette industry, 19.4x for the hotel sector, and an average of 6.3x for the agricultural sector in FY24E.
The firm kept its Buy rating and set a target price of Rs 325 per share, representing an increase of almost 11%. Revenues and PAT are anticipated to expand at a CAGR of 7.5–10% between FY22 and FY24E, but inflation will continue to have an impact on EBITDA margin.