10:1 Split, Dividend Soon: FMCG Giant ITC Cheaper Than Peers, Stock May Rise 16% In 12 Months: Technicals!

The largest FMCG company, ITC is probably one of the unique stocks in the sector that are undervalued for a longer term, cheaper than peers, and has strong growth potentials which are yet to be unlocked. The stock has been currently resisting around 430 levels. Ahead of its Q4 results and final dividend recommendation, ITC's near-term target is around Rs 455 to Rs 500.

As per data, ITC Ltd is trading below 5 out of 9 Oscillators in the bearish zone. While the stock is also below 6 out of 8 SMAs. The 200-day SMA, 150-day SMA, and 100-day SMA for the stock are around Rs 440.6, Rs 437.1, and Rs 434.7 respectively.

However, ITC shares have been floating between Rs 430 to Rs 433. On May 14, at the time of writing, the stock traded at Rs 431.60, flat from the previous day.

At present, ITC shares are down by 14% from its 52-week high of Rs 499.60 apiece, while it is higher by 8% from its 52-week low of Rs 399.30 apiece.

According to data from Motilal Oswal, ITC shares 1-year returns is just 1%, while its peers Godfrey Phillips India and VST Industries have gained by 94% and 15% respectively. Also, in terms of per share, Godfrey and VST are trading over Rs 3,600 and Rs 3,850 apiece. Further, the P/E ratio of IT is at 26.38x versus its peers Godfrey at 21.07x and VST at 19.35x.

Also, Axis Direct data revealed that in the last 1-year ITC Ltd has Underperformed Nifty 50 by 19.21% (CAGR difference), while for 3 out of the Last 12 Months, i.e 25% of the time it has beaten Index returns.

However, ITC's fundamentals are healthy. As per Axis report, 3 out of the last 5 years, ITC's PAT Growth has been high. In 5 out of the last 5 years, the ROE has been high. And lastly, 5 out of the last 5 years, Debt - The equity ratio has been low.

Data from Trendlyne pointed out that, currently, ITC's support levels are ranging from Rs 420.37 to Rs 429.08, while its resistance is between Rs 435.27 to Rs 444.17. That being said, ITC's pivot is Rs 432.27.

Further, on Trendlyne, the consensus recommendation from 34 analysts for ITC Ltd. is BUY. Of the total, 21 analysts have recommended Strong BUY on ITC, while 10 analysts have suggested just BUY. On the other hand, 2 analysts have given HOLD, while only 1 gives a SELL call. The 1-year average target price is Rs 502, hinting at a 16% potential upside ahead.

Hence, broadly, ITC is among the top FMCG stocks to buy.

Key Triggers for ITC this month are:

ITC will be in focus for its upcoming dividend recommendation and earnings.

ITC is scheduled to meet on May 23 to consider and approve the Audited Standalone and Consolidated Financial Results of the Company along with the Segment-wise Revenue, Results, Assets and Liabilities for the Quarter and Twelve Months ended 31st March 2024.

Also, the company will consider and recommend Final Dividend for FY24, on May 23 as well.

This will be the second dividend payout in 2024 by ITC. Earlier, in 2024 during February month, ITC turned ex-dividend earlier for an interim dividend of Rs 6.25 per share or 625% having a face value of Re 1 each for the financial year ending on 31st March 2024. As per Trendlyne data, since July 2001, ITC has delivered up to 28 dividends to its investors. In the last 12 months, ITC has paid up to Rs 15.75 per share dividend.

Developments in ITC Hotel's demerger will be another key trigger for ITC shares. ITC's ordinary shareholders are scheduled to meet on June 6, 2024, to consider, and if thought fit, approve the proposed Scheme of Arrangement amongst ITC Limited and ITC Hotels Limited and their respective shareholders and creditors.

Apart from dividend payout, ITC has split only once in the ratio of 1:10 and that was done in September 2005. ITC split its 1 equity share into ten equity shares. The face value was trimmed to Re 1 from Rs 10, hence, a stock split ratio of 1:10.

Additionally, ITC also has a history of rewarding investors with bonus shares. The first bonus issuance was in September 2005, for a 1-to-2 ratio. This meant that ITC awarded 1 new bonus share on the existing two equity shares. ITC further declared a 1:1 bonus issue in August 2010, and a 1:2 ratio in July 2016.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.