Shares of ITC Ltd rose as much as 4.4 percent to Rs 175.20 on Monday and was the top gainer on the Nifty 50 index after brokerage firm CLSA upgraded the stock to "buy" from "outperform." The price target is set at Rs 220 per share.
The brokerage is of the view that the FMCG firm's long-term positives are unfolding as revenue diversifies and the FMCG segment is set to become a major value driver. CLSA expects ITC's FMCG segment to deliver an EBITDA CAGR of 30 percent in the FY20-23, driven by industry tailwinds, multiple margin levers and falling CAPEX.
It added that value accretive acquisitions and improving capital allocation will provide support.
The stock has declined nearly 27 percent in 2020.
CLSA said that ITC's valuations are compelling with about 5 percent free cash flow yield, 6 percent dividend yield.
However, the possible sale of government's stake and negative regulatory newsflow can be risks.