1:10 Split, 3 Bonus Shares: FMCG ITC Turns Rs 1 Lakh To Rs 6.25 Crore In 20 Years: Fundamental Analysis To BUY

FMCG ITC has been a rockstar in its sector in recent times. The attractive part of the cigarette behemoth is that it is inexpensive compared to its peers. Although, on Friday, ITC shares were driven by bulls, it is still cheaper by 17.3% from its all-time high price levels.

This gives more room for buying for hedging potential double-digit returns in the near term. The majority of brokerages' next target price in ITC is between Rs 500-550 with the exceptions of a few below this level.

The journey to over the Rs 400 mark has been bittersweet in the last two decades, but ITC is a multi-bagger with gains of more than 1,280% since March 2005. And after its first stock split and bonus issue, you're simply rich!

ITC Share Price:

On March 1, 2024, ITC shares gained over 1.6% on BSE to hit an intraday high of Rs 413.10 apiece. M-Cap of ITC is over Rs 5.13 lakh crore, making it the second largest FMCG firm in the country.

ITC is not too far away from achieving the top FMCG title from its biggest rival Hindustan Unilever (HUL) which currently enjoys the status with an m-cap of over Rs 5.69 lakh crore.

At the current price level, ITC shares are down by 17.31% from its highest price level of Rs 499.60 apiece. But from its 52-week low of Rs 369.70 apiece, ITC shares are trading higher by 12%. ITC's 1-year gain is over 8.5%, while the 5-year upside is 48% as of now on BSE. But its gains since the first stock split of 1:10 and bonus issue of 1:2 are mind-boggling!

ITC Stock Split And Bonus Issue Charm:

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.

From its ex-split and ex-bonus date of September 21, 2005, when ITC shares were around Rs 46.7 apiece, the company has recorded a whopping 784% gain. But from March 1, 2005, when ITC shares were merely at Rs 29.75 apiece, the stock has skyrocketed by an eye-bulging 1,288.57% on BSE to date. These prices are adjusted to the stock splits and bonus issues.

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.

Let's suppose, you invested Rs 1 lakh on ITC shares on March 1, 2005, you will get 3,361 equity shares at Rs 29.75. Post the first stock split, this number of shares will rise to 33,610 equity shares (3,361 X 10). Further, you will get 16,805 bonus shares (33,610 X 1/2) due to the 1:2 ratio, taking your total number of shares to 50,415 equity shares.

Further, by the end of the second bonus issue of 1:1, 50,415 equity shares of ITC will get another 50,415 bonus shares (50,415 x1/1), taking the total to 1,00,830 equity shares in the company. Lastly, after the 1:2 ratio in July 2016, you will get 50,415 bonus shares (1,00,830 X1/2), taking your total shareholding to 1,51,245 equity shares.

Firstly, this will be a 45 times rise in your number of shares as of now considering you have not modified your shareholding in ITC till now. Meanwhile, your Rs 1 lakh at the start of March 2005, will turn to a corpus of nearly Rs 6.25 crore.

The gains are even higher if include ITC dividend payouts.

ITC Dividend:

Since July 2001, ITC has delivered up to 21 dividends to its investors. The latest payout was last week of 625% interim dividend for FY24.

ITC declared an interim dividend of Rs 6.25 per share or 625% having a face value of Re 1 each for the financial year ending on 31st March 2024. The company had said that such a Dividend would be paid between Monday, 26th February 2024 and Wednesday, 28th February 2024 to those Members entitled thereto. For the same, ITC shares have turned ex-dividend on February 8 which was also the record date to determine eligible shareholders.

ITC Share Price Targets Ahead And Fundamentals:

The majority of analysts are optimistic about ITC share price. However, Goldman Sachs trimmed its target price on ITC to Rs 480 per share. Goldman's outlook is neutral, however, it has maintained a buy on the FMCG giant.

Meanwhile, brokerages like KR Choksey recommended BUY for the target of Rs 533.30. BOB Capital Markets have set a target price of Rs 532, while Motilal Oswal recommended a target price of Rs 515 apiece. Axis Direct has a target price of Rs 500, Emkay has a target price of Rs 520, and Prabhudas Lilladher set a target price of Rs 489.

The highest target price is of Rs 556 set by brokerage Centrum which is the highest among all other brokerages.

Also, as per Trendlyne data, the average target price on ITC is Rs 502, indicating a 23% upside from the current price level. The consensus recommendation from 35 analysts for ITC Ltd. is BUY. EPS is expected to grow by 8.6% in FY24.

As per Trendlyne, the fundamental analysis for ITC stock are:

- Debt to Equity Ratio of 0 is less than 1 and healthy. This implies that its assets are financed mainly through equity.

- Mutual Fund Holding increased by 0.26% in the last quarter to 9.66.

- Price to Earning Ratio is 24.95, lower than its sector PE ratio of 28.83.

- Return on Equity(ROE) for the last financial year was 27.75%, more than 20% in the last financial year, indicating an efficient use of shareholder's capital to generate profit.

- Interest Coverage Ratio is 639.94, higher than 1.5. This means that it can meet its interest payments comfortably with its earnings (EBIT).

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor 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.