ITC share price target raised post Q3 results as cigarette business continues to be strong
1 min read . Updated: 06 Feb 2023, 08:44 AM IST
Premium- Continued momentum in cigarette volume, improving sales/ profitability performance of other businesses should continue to drive ITC's overall performance, as per analysts
After a positive surprise in the budget earlier this week, ITC reported a strong quarter with robust all-round performance, as per analysts, with cigarettes business growing by 18% year-on-year (YoY) aided by strong volume recovery. The FMCG major reported a 21% in its net profit for the third quarter ended December 2022 to ₹5,031 crore.
“3Y cigarette volume CAGR at 6%+ was a key positive and a benign tax environment should maintain the momentum. FMCG growth was industry-leading, with a positive surprise on margins. EBITDA growth remained strong at >20% as the company continues to recover from the pandemic. We boost EPS by 4-6% and raise our PT to ₹450. Reiterate Buy on ITC shares," said global brokerage Jefferies.
It has upgrade its FY23-25e EPS by 4-6%, marking the third straight quarter of EPS upgrades. “With only a modest ~2% tax hike in the budget, ITC should see continued momentum in the cigarette business, even as other segments also continue to do well," it added.
In its 3QFY23 results, ITC's reported strong operational performance with broad-based growth across divisions, driving revenue/ earnings growth. Following the 2%–3% tax increase, price increase taken by the company (if any) would not impact the demand momentum, in Antique Stock Broking's view.
“In our view, continued momentum in cigarette volume, improving sales/ profitability performance of other businesses (esp. FMCG, Paperboard, and Hotels) should continue to drive ITC's overall performance. We maintain BUY recommendation on ITC shares with SoTP based revised target price of ₹435 (previously ₹419)," Antique recommended.
Another brokerage Edelweiss expects legal cigarette players to continue to gain market share from illegal players with ITC leading the pack. ITC is one of its top stock picks and has retained ‘BUY’ with an SoTP-based TP of ₹450.
“We expect cigarette stocks to re-rate due to potential gains in market share and a stable tax policy. By dint of its focus on digital adoption, customer-centricity and agility, ITC continues to deliver strong growth across segments," the brokerage added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
