Amidst a volatile week, FMCG ITC outperformed both Sensex and Nifty gained by 0.5-0.8% during the trading session from April 22nd to 26th. While ITC shares jumped 3.5% in the same week, being the best weekly performance in the past few months. ITC share price traded upbeat due to an update on the demerger of ITC Hotels in the ratio of 1:10, and further expansion in the international market. ITC's share price will be in focus ahead for its Q4 and full-year fiscal earnings report. ITC is a crorepati-making stock despite being undervalued!
ITC Share Price:
On BSE, ITC stock ended at Rs 439.95 apiece, up by 0.6% with a market cap of Rs 5,49,265.32 crore on Friday last week. ITC is the largest FMCG company after outrunning Hindustan Unilever (HUL) in December last year.
Still, ITC is undervalued, trading lower by 12% from its 52-week high of Rs 499.60, and is up by 10.2% from its 52-week low of Rs 399.30 apiece.
In the trading week that ended on April 26, ITC shares are up by 3.54% better than benchmarks. However, YTD, the stock is down by 6% but has kept a recovering pace. In 5-years, ITC is up by 45% on BSE. But its all-time gain is a whopping 8,108.02%.
The stock stood at Rs 5.36 apiece on July 14, 1999. If an investor bought ITC shares for Rs 50,000, 25 years ago, then now your corpus is around Rs 1,23,12,030 crore or Rs 1.23 at the CMP. Gains are of Rs 1,21,62,030 crore on Rs 50,000 investment.
As per ICICI Direct data, currently, ITC stock's price-to-equity ratio is at 26.84x, while its book value is at 55.3481. Further, return on equity (RoE) is at 29.6%, while its return on capital employed (ROCE) is at 38.99%.
The Q4 earnings report of ITC will be the key trigger going forward. Although, ITC has not announced the date of Q4 results yet, but it can be expected anytime soon in May.
ITC Latest Developments:
ITC is planning a scheme of arrangement with its ITC Hotels business. As per the regulatory filing, on April 24, ITC announced that as directed by the Hon'ble National Company Law Tribunal, Kolkata Bench, vide Order dated 22nd April 2024 which was received by us on April 24, a Meeting of the Ordinary Shareholders of the Company will be convened on Thursday, 6th June 2024 at 10.30 a.m. (IST) through electronic mode to consider, and if thought fit, approve the proposed Scheme of Arrangement amongst ITC Limited and ITC Hotels Limited and their respective shareholders and creditors.
ITC is set to separate from its hotel business, ITC Hotels Limited. The demerger is a shares swap transaction with an entitlement ratio being at 1:10. Unlike mergers/demergers involving different sets of shareholders, 100% of the ultimate economic beneficial interest of the hotel business will remain with ITC shareholders - 60% directly, 40% through ITC.
The share entitlement ratio includes -- for every 10 (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 the ITC Hotels.
In another development, ITC announced that its wholly-owned subsidiary, WelcomHotels has launched ITC Ratnadipa, a jewel in Colombo's skyline that promises to enrich the tourism and hospitality landscape of Sri Lanka. This luxury destination draws inspiration from the national flower of Sri Lanka, the floating water lily, which is a recurrent motif across the hotel. ITC Ratnadipa or "Island of Gems" offers 352 guest rooms, suites and service apartments, each adorned with private balconies with breathtaking waterfront views.
ITC Near-Term Target Price:
In the latest preview report, HDFC Securities has maintained BUY for a target price of Rs 460 apiece which is a short-term call.
HDFC Securities model model 3% YoY growth in cigarette revenue, with volume growth of 1% YoY (4% 5-year CAGR for ITC. In Q4, the brokerage expects the company's Hotels/Agri/Paper to grow by 9/flat/-4%, while it models 7% YoY growth in FMCG. Moreover, HDFC Securities expects cigarette EBIT to grow by 2% YoY, while models FMCG EBIT margin at 9.5% vs. 10.1% YoY, and expects EBITDA to increase by 2% YoY.
Among the key monitorable in Q4FY24, HDFC Securities highlighted the following key factors to watch for ITC -- Cigarette volume and mix improvement; New growth vectors in FMCG business; Outlook on paper business; and Outlook on Agri, Hotel and Food tech businesses.
ICICI Direct stays on its target price of Rs 500 with an entry price of Rs 420 as of now. The brokerage values ITC's cigarettes business 22x FY25 earnings & FMCG business 6x FY25 sales.
ITC Corporate Actions:
ITC is the biggest cigarette & second largest FMCG company in India with ~80% of the market share in cigarettes & presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. The company is also present in paperboard, printing & packaging business, agri & hotels businesses.
Dividend: In 2024, ITC turned ex-dividend earlier for 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. As per Trendlyne data, since July 2001, ITC has delivered up to 28 dividends to its investors. In the last 12 months, ITC has paid up to Rs 15.75 per share dividend.
Stock Splits: Meanwhile, ITC Ltd split once in the ratio of 1:10 in September 2005. ITC split 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.
Bonus Shares: The first bonus issuance was in September 2005, for a 1-to-2 ratio. 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.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or 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.
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