1:10 Split, 1:1 & 1:2 Bonus, 3.85% Yield: FMCG ITC Stock A Smoking Hot Bet, Prabhudas Lilladher Recommends BUY

FMCG giant, ITC is back as a smoking hot bet. This time it will be Prabhudas Lilladher who has recommended buying on ITC for a target price of Rs 465 per share. This would fetch over 16% returns over ITC's current market price. After being a star performer in 2023, ITC witnessed significant correction, becoming undervalued and signalling a buy-on-dips opportunity.

ITC is currently trading 20% lower from its 52-week high of Rs 499.60 apiece, while it is up by a single-digit 8.54% from its 52-week low of Rs 369.70 apiece.

At the time of writing, ITC traded at Rs 401.40 apiece, down by 1.95% on BSE with a market cap of Rs 5,00,881.40 crore. The stock was near its intraday low of Rs 399.30 apiece, after it opened at the day's high of Rs 405.85 apiece.

The latest drop in ITC shares could be attributed to reports stating that the maker of Lucky Strike cigarettes, British American Tobacco, may be looking to sell a portion of its stake in ITC Ltd.

The more ITC drops, the more there is buying opportunity because its long-term target is crossing Rs 500.

Further, as per the data from Trendlyne, ITC is also underperforming its sector by 35.29% in the past year. But all other fundamentals of ITC are positive with Return on Equity(ROE) healthy at 27.75%, Price to price-to-earning ratio lower than the sector at 24.49, and Debt to Equity Ratio of 0 is less than 1 and healthy.

Amidst this, on March 11, Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher said, "The stock has given a decent correction from the peak level of 480 and has bottomed out near the 398 zone. Currently, after a short consolidation, it has improved the bias with a positive candle."

Parekh further said, "The RSI is well placed and has shown a trend reversal with the potential to rise further in the coming days. With the chart looking good, we suggest buying this stock for an upside target of 465, while keeping the stop loss of R396."

But ITC is set to fire up more! The average 1-year target price on ITC is Rs 502, implying a massive 25% upside ahead, as per Trendlyne. The consensus recommendation from 35 analysts for ITC is BUY. ITC's EPS is expected to grow by 6.7% in FY24.

Other key factors of ITC:

The FMCG player announced a stock split only once in two decades. It was on September 21, 2005, when ITC turned ex-split for splitting 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.

Meanwhile, ITC also turned ex-bonus for a 1-to-2 ratio on September 21, 2005. 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.

Additionally, since July 2001, ITC has delivered up to 28 dividends to its investors. The latest payout was last week of a 625% interim dividend aggregating to Rs 6.25 per share for FY24. In the last 12 months, ITC has paid up to Rs 15.75 per share dividend.

On the current market price, ITC shares have a dividend yield of 3.85%.

In Q3FY24, amidst a challenging macro-economic and operating environment as stated above, and a high base effect in some of its operating segments, the Company delivered a resilient performance during the quarter.

During the quarter, Gross Revenue stood at Rs.17,483 crores representing a growth of 2.1% YoY (excl. Agri Business: up 3.9%) while PBT (before exceptional items) at Rs. 6,731 crores grew by 0.8% YoY. PAT grew by 10.8% YoY to Rs. 5,572 crores. Earnings Per Share for the quarter stood at Rs. 4.47 (previous year Rs. 4.06).

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.