ITC stock rises 21% in 2023 so far, better than peers. What makes this FMCG player so attractive?
- Sonam Srivastava- Founder at Wright Research said, ITC's shares recently touched a 52-week high, reflecting a positive outlook for the company. She believes that both the cigarette and FMCG sectors are expected to witness double-digit earnings growth in FY24.
So far, the year 2023 has been volatile for the Indian equity market but that has not been the case for FMCG giant ITC. The stock has seen more buying than selling in less than four months, logging double-digit gains. On Wednesday, ITC stock picked up momentum to touch a fresh 52-week high owing to a positive outlook for the company ahead. ITC's cigarette and FMCG business are factored to record double-digit earnings growth in FY24. This FMCG player is still attractive compared to its counterparts despite hitting a new 1-year high.
At the time of writing, ITC's stock price traded at ₹399.60 apiece on BSE up marginally. Earlier in the day, the stock hit a new 52-week high of ₹402.60. Its current market cap is around ₹4,96,312.89 crore.
In 2023, till date, ITC shares have zoomed by nearly 21%. In a year, the upside is more than 55% on Dalal Street.
On the other hand, ITC's peers HUL slipped nearly 2.6% year-to-date, Dabur India sheds over 6.5%, while Emami records an even steeper drop of nearly 14.6% so far in 2023. However, counterparts like Nestle and Godrej Consumer also saw an upside so far in the current year, advancing by around 5% and 9% respectively on BSE. That being said, ITC stock beats all of them in terms of gains in percentage terms!
Explaining the performance of ITC share price, Sonam Srivastava- Founder at Wright Research said, "ITC's shares recently touched a 52-week high, reflecting a positive outlook for the company. The legal cigarette industry is gaining market share from illegal sales due to rational tax policy, which bodes well for ITC's cigarette business. Both the cigarette and FMCG sectors are expected to witness double-digit earnings growth in FY24, driven by good margin recovery in the FMCG business. ITC's valuation remains attractive compared to other consumer staples firms, even at the current all-time high, making it a strong choice for investors."
Further, Srivastava added, "The hotel business may benefit from the company's focus on management contracts, which should improve return ratios and signal value unlocks to investors. The paperboard and agribusinesses are also expected to perform well, driven by factors such as raw material cost corrections and government policies. Overall, ITC's upward trajectory and strong performance in key businesses like cigarettes and FMCG indicate a bright future for the company."
Not just that, ITC is also among the top picks of analysts at Axis Securities amidst the Q4 earnings season.
In Q4FY23, Axis Securities in its preview note said for ITC, "We expect cigarettes to grow 16% YoY (13% volume), FMCG to grow at 14% (mid volume growth) primarily led by price growth, hotels (continued strong momentum), papers (recovery) and agri to decline on a high base."
Also, the brokerage's note added, "EBITDA Margins are expected to expand 450bps on account of GM expansion, better mix, operating leverage, and cost savings."
Whereas ICICI Direct has recommended 'Buy' on ITC in its preview note for a target price of ₹450.
In recent times, ITC has also made key changes in its structure of the business with divestments and acquisitions.
On Wednesday, ITC announced that it has executed the acquisition of 100% of the share price of Sproutlife, in one or more tranches, over a time period of three to four years.
Earlier this month, the company also divested its entire shareholding of 4,65,09,200 or 26% in its joint venture Espirit Hotels.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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