Home / Markets / Stock Markets /  ITC shares climb to 5-year high. Brokerage has 'Buy' tag, sees strong upside
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Shares of ITC Ltd climbed more than a per cent to 348 apiece on the BSE in Thursday's trading session, to 5-year high, despite a weak market with Sensex falling nearly 500 points. ITC shares have picked momentum in the last few sessions and have rallied 10% in a month as compared to 0.2% rise in benchmark Sensex.

“ITC’s recent price outperformance has kept investors gasping, however as argued in its report, we see potential for it to inch-up to new records soon, given likely potential for price hikes in cigarettes pre-empting next Union budget, strong underlying performance with improved profitability in the Foods portfolio, improving outlook and potential demerger for the Hotel business, and bridging valuation gap. Besides this, focus continues on augmenting distribution could scale up FMCG business and expand market share including cigarettes," said brokerage Centrum.

It sees more upside on ITC shares and has maintained its Buy rating while increasing its target price on the FMCG stock to 424 per share (from 351 earlier). The counter has gained over 57% this year so far.

“We believe benign tax-regime, coupled with selective price increases, cigarette division to report double digit EBIT growth in FY23. However, FMCG Foods business scale-up driven by distribution expansion could lift margin trajectory, while performance for Hotels, Agri. and Paper driven by improved economic activities. Given ITC’s refreshed strategy coupled with improved macro and micro environment we expect ITC to outperform its peers. Considering strong performance, we have increased FY23E/FY24E earnings by 6.0%/6.3%," the note stated.

Though, as per Centrum, sharp increase in any form of taxation, higher leaf tobacco prices, and delayed recovery in the economy, could be key risks.

ITC reported a 38% rise in consolidated net profit to 4,169 crore for the April-June quarter following a good performance by its business verticals. The company had posted a net profit of 3,013 crore in the year-ago quarter. Revenue grew over 41% to 18,320 crore from 12,959 crore a year ago.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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