ITC stock is at a multi-year high after Q4 results beat expectations. Should you purchase?

  • May 19, 2022, noon

Shares of ITC rose to their highest in 3 years in Thursday's opening deals after the FMCG major posted a 12% growth in net profit to 4,195 crore for the January-March period, compared with 3,755 crore a year ago. The Kolkata-based company's revenue from operations rose 15% to 17,754 crore as against 15,404 crore in the last year period.

4,141.9 crore, while cigarette revenue rose 10% to 6,443. The hotels business reported segment revenue of 389.6 crore during the quarter, up 35.3% from a year earlier.

Analysts at JPMorgan have upgraded ITC shares to overweight with a March 2023 price target of 305. "In our view, ITC offers a good combination of earnings visibility for FY23, strong cash flows, and a high dividend yield." "We believe the stock should do well in current volatile markets as a good defensive play with undemanding valuations," the note stated.

"We largely retain our FY23 and 24e EPS estimates." While FMCG peers combat a growth slowdown and RM pressures, ITC is seeing a recovery in earnings, with good momentum across verticals and high margin visibility. "A higher dividend payout and lower capex are also encouraging," said Jefferies. It has retained a buy rating on ITC shares with a price target of 305.

Paperboards, paper and packaging revenue stood at 2,182.7 crore in the fourth quarter as against 1,655.9 crore in the same period last year, the company said, adding the re-opening of educational institutions aided recovery but it was still below pre-pandemic levels.

"As the cigarette business has started re-gaining market share from illicit trades, we believe that the margins will improve in the business." Hence, we have raised our target price to 293 (SOTP valuation) and upgraded the stock to accumulate, "said brokerage Dolat Capital.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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