FMCG ITC stock is recommended to buy amidst latest price correction by 9.2% from its 52-week high of Rs 528.55 apiece on BSE. Brokerage IIFL Securities is bullish on ITC due to its growth momentum in volumes. The brokerage further expects steady performance in ITC's both Cigarette and FMCG business. The short target on ITC is set at Rs 510, hinting at potential single-digit upside ahead.
ITC Share Price:
After market hours of November 5th, ITC stock price closed at Rs 480.05 apiece on BSE, with market cap of Rs 6,00,527.78 crore. The stock is down by 9.2% from its 52-week high, while its 52-week low is at Rs 399.30 apiece.
ITC's return on equity is around 28.22%, which is strong.
ITC BUY Recommendation:
In its latest note, IIFL expects steady performance in Cigarette and FMCG business on the back of improvement in consumption trends and company's focus on: i) innovative and differentiated offerings in Cigarettes, and ii) distribution and penetration led growth in FMCG.
However, the brokerage also pointed out that with inflationary trends in palm oil prices, the margin for FMCG business is expected to be under pressure in near-term. It added, "We expect the FMCG segment Ebit to decline by ~7% yoy in 2HFY25."
On the valuation, IIFL said, ": On the back of this result and expected cost inflation in cigarettes (leaf tobacco prices), FMCG and paperboards division, we cut our EPS estimates for FY25-27 by ~5%. We maintain BUY rating with a TP of Rs510 (~8% upside)."
ITC Corporate Actions:
Since its listing, ITC has rewarded investors with bonus issues, stock splits and dividends over the years since its listing.
Dividends: The FMCG giant has delivered up to 29 dividends since July 2001, as per Trendlyne data. In the last 12 months, the dividend payout is Rs 13.75 per share. While its dividend yield is of 2.63%.
Bonus Issues: The company has a strong track record of bonus shares. The last bonus was of 1:2 ratio in July 2016, while ITC delivered 1:1 and 1:2 bonus ratios in August 2010 and September 2005. ITC has overall delivered 3 bonus shares.
Stock Split: Further, ITC has carried a single stock split so far. In September 2005, ITC's shares split from Rs 10 face value to Rs 1 each, hence a ratio of 1:10.
ITC Results:
In Q2FY25, ITC performed resiliently during the quarter. Gross Revenue stood at Rs. 20,360 crores representing a robust growth of 16.0% YoY. PBT (before exceptional items) and PAT stood at Rs. 6,755 crores and Rs. 5,078 crores respectively. Earnings Per Share for the quarter stood at Rs. 4.06.
ITC Limited is a diversified conglomerate with a presence in multiple portfolios of businesses, including cigarettes, FMCG, hotels, agri-business, and paperboards and packaging. The company holds a dominant position in the Indian cigarette market, contributing significantly to its revenue. ITC has also expanded into various FMCG sectors, offering products like packaged foods, personal care items, and stationery.
ITC Split-Up Of Hotels Business:
ITC Ltd is currently in the process of demerging its hotel business, and the board has approved the consolidation of its shareholding in rival hospitality chains Oberoi and Leela by acquiring shares from a wholly-owned arm, Russell Credit Ltd. The board approved the acquisition of 1.52 crore equity shares of Rs 2 each of EIH Ltd (EIH) and 34.60 lakh equity shares of 2 each of HLV Ltd (HLV), from Russell Credit Ltd (RCL), a wholly-owned subsidiary of the company, at their respective book value.
As per IIFL, the demerger is not expected to meaningfully impact earnings. Hence, IIFL believes that the company can enhance its capabilities across its three segments, should it decide to bring in strategic investors in the businesses. The brokerage believes that this will also help unlock additional value from the company.
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