1:10 Split, 3 Bonuses, 29 Dividends; FMCG Giant Stock ITC Reiterated To BUY; HSBC Hikes Target Price To Rs 580

FMCG giant ITC's share price has been on a losing streak for three consecutive trading sessions, falling by nearly 3% from its all-time high. The last time ITC was in green was last week when it touched a record of Rs 528.55 apiece. The start of October witnessed profit booking in ITC shares. However, amidst the latest volatility, global brokerage HSBC has reiterated BUY on ITC, while raising its target price to Rs 580 apiece.

ITC Share Price:

ITC stock ended at Rs 513 apiece on BSE, down by 0.6% after market hours of October 3. The company's market cap stood at Rs 6,41,639.81 crore. This will be the third bearish day for ITC.

ITC fell by 0.41% on October 1, and further by 0.9% on September 30. The market was closed on October 2nd this week.

Last week, on Friday, ITC shares touched a new all-time high of Rs 528.55 apiece, and since then the stock has consolidated.

Nonetheless, ITC stock year-to-date gains are positive by nearly 10% upside on BSE. The stock's price-to-equity ratio is at 31.34x, while return on equity is strong at 28.29% as of October 3, 2024.

ITC Share HSBC Recommendations:

Brokerage HSBC is the latest to upgrade its stance in ITC. According to the brokerage, ITC shares trade at a widened discount, contributing to the attractiveness of the company amid a volatile market, in comparison to its peers.

HSBC believes a stable tax regime on the cigarette business is a key positive for ITC, however, worst-than-estimated volume growth in this business could be a downside risk.

Also, ITC's FMCG business' earning growth prospects are positive ahead.

That being said, HSBC maintained BUY rating on ITC, while increasing its target price to Rs 580, which signals a potential upside of over 13% in ITC ahead.

ITC Corporate Rewards:

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%.

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.

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.

ITC 1:10 Demerger:

Going ahead, ITC is going to demerger its hotels 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. The balance stake of about 40% will be held by ITC.