FMCG ITC stock price has corrected sharply since last month. By the end of the November 19th trading session, the stock is now down by 11.6% from its 52-week high, while it is less than Rs 70 away from hitting its 52-week low. In a month, the stock has given zero returns, falling by 3.4% on BSE. Does the latest correction in ITC bring buying opportunity? Let's find out!
ITC Share Price:
After market hours of November 19, ITC share price ended at Rs 467.35 apiece, flat from the previous session on BSE. The company's market cap is around Rs 5,84,640.47 crore. The stock's 52-week high and low is at Rs 528.55 apiece and Rs 399.30 apiece respectively.
From its 52-week high, ITC is down by 11.58%, while the stock is just Rs 68.05 away from hitting its 52-week low. Nonetheless, the return on equity on ITC is strong at 28.22%.
ACCUMULATE ITC Stock:
In its latest report, KR Choksey pointed out that in Q2FY25, ITC showcased robust sales growth, primarily fueled by its Agri and hotel segments, despite margin pressures from rising costs and subdued demand in some areas. The company's strategic focus on innovation, sustainability, and expanding its FMCG and hospitality offerings positions the ITC as favorable for future growth.
With a diversified portfolio and strong distribution channels, KR's note further mentioned that ITC is well-equipped to navigate economic challenges. Signs of rural recovery, stable commodity prices, and favourable macroeconomic conditions further enhance its outlook for consistent earnings growth in the upcoming quarters.
On the valuation, KR Choksey's note said, "We lower our FY25E/26 EPS estimate by 4.6%/ 2.6%, respectively, due to lower-than-expected Q2FY25 EPS performance, subdued demand, and inflationary pressure. However, we expect for the long term ITC will deliver strong performance on the back of stability in taxes and rural growth. We value ITC shares using the SOTP (sum of the parts) approach, applying 15.5x EV/EBITDA (unchanged) on the FY26E EBITDA of the Cigarette business; 17.3x EV/EBITDA (unchanged) on the FY26E EBITDA of the Hotels business; 4.5x EV/EBITDA (unchanged) on FY26E EBITDA of Agri-business; 4.1x EV/EBITDA (unchanged) on FY26E EBITDA of the paper business; and 9.2x EV/Revenue (unchanged) on FY26E Revenue of FMCG business. We arrive at the target price of INR 534 per share (previously: INR 545)... accordingly we maintained our "ACCUMULATE" rating on ITC Ltd shares."
Looking forward, ITC is all set to demerge its hotel business which will be in the ratio of 1:10. Because as part of the merger process, for every (Ten) Ordinary Shares of the face and paid-up value of Re. 1 each held in ITC, 1 (One) equity share of the face and paid-up value of Re. 1 in ITC Hotels. After the completion, ITC's stake will be reduced. The shareholders of ITC will hold about 60% of ITC Hotels directly, which is proportionate to their shareholding in ITC. ITC will hold a balanced stake of about 40%.
Also, ITC has a strong record of bonus issues and dividends, while the company has split its shares once in its history of listing on BSE and NSE.
Bonus Issue: ITC has rewarded its shareholders with three bonuses. The first bonus of the 1:2 ratio was in September 2005, followed by the second bonus of 1:1 which was in August 2010. Also, ITC delivered a bonus of 1:2 in July 2016.
Dividends: Since July 2001, the company has delivered up to 29 dividends, as per Trendlyne data. In the past 12 months, the dividend payout stood at Rs 13.75 per share. Currently, ITC's dividend yield is about 2.94%.
Stock Split: The only time ITC split its shares was in September 2005 in the ratio of 1:10. The face value of Rs 10 has been trimmed to Rs 1 since September 28, 2005.
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