10:1 Split Ratio Soon, 3 Bonus: FMCG Giant ITC To Declare Dividend, Q4 In 4 Days; BUY For 12% Gains Near Term

Largest FMCG and cigarettes maker in India, ITC Ltd will be in focus next week for its final dividend recommendation and Q4 results for FY24. ITC shares are currently below Rs 440 levels, and YTD is down by nearly 7% on BSE. ITC stock is under valued compared to the performance of FMCG sector, making it an attractive bet. In Q4FY24, ITC's cigarette sales are likely to record double-digit growth, while momentum is expected to continue in other FMCG businesses.

ITC Share Price:

In the special live trading session on Saturday, ITC shares stood at Rs 436.45 apiece, flat compared to the previous day's print. The company's market cap is at Rs 5,44,895.67 crore.

The stock's 52-week high and low are at Rs 499.60 and Rs 399.30 apiece respectively.

ITC Dividend:

On May 23, ITC's board of directors will consider and recommend Final Dividend for the financial year ending 31st March 2024.

Earlier, in 2024 during February month, 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.

ITC Q4 Earnings:

Also, on May 23, the board will consider and approve the Audited Standalone and Consolidated Financial Results of the Company along with the Segment-wise Revenue, Results, Assets and Liabilities for the Quarter and Twelve Months ended 31st March 2024, the Balance Sheet as of that date, the Statement of Cash Flows for the financial year ended on that date and the Notes thereto.

In its Q4 preview note, brokerage Nirmal Bang for ITC said, "We expect ITC's overall topline growth to be moderate at ~4% YoY on the back of Cigarettes business growth partially getting offset by relatively lower sales in FMCG-others business and decline in the Agribusiness. Cigarette sales are likely to grow by 10% YoY with an expected volume increase of 5% YoY. Volume growth on a 5-yr CAGR basis is likely to remain healthy at 3.8% YoY."

Further, the brokerage expects the growth momentum in Other-FMCG business to continue, although it is likely to be relatively lower with 7% YoY growth in segment revenue. Further, we expect the hotel business to grow by 13% YoY and the Agribusiness to decline by 4% YoY. Paperboards, Paper & Packaging business is expected to decline by 5% YoY.

At ITC's level, Nirmal Bang's note said, "We expect EBITDA margin to decline by ~40bps to 37.5% (up 90bps QoQ) as we expect lower profitability in the Cigarettes business, FMCG-others business and Paperboards, Paper & Packaging business. EBITDA is likely to grow by 2.9% YoY and APAT is likely to decrease by 2.7% YoY."

BUY ITC Shares?

HDFC Securities has recommended BUY for a short-term target of Rs 490.50. This implies over 12.3% potential upside in ITC ahead.

Also, Motilal Oswal has said, The resilient nature of ITC's core business amid an uncertain environment in the sector, along with a 3-4% dividend yield, makes it a good defensive bet in the ongoing volatile
interest rate environment," adding, "The performance of other FMCG segments remained resilient, with 7.3% revenue growth. The contribution of digital and modern trade businesses was significant at 31% of rev."

Also, Motilal's note said, the performance of other FMCG segments remained resilient, with 7.3% revenue growth. The contribution of digital and modern trade businesses was significant at 31% of revenue. Additionally, the brokerage believes that the earning CAGR at the PBT level stood at 8.5% over FY18-23. We expect ITC to post a c.7% earnings CAGR over FY24-26.

Other Key Factors, And Announcements Ahead?

ITC also holds the record of paying bonus shares and turning ex-split. So far in its history, ITC has split only once in the ratio of 1:10 and that was done 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.

Also, ITC has rewarded investors with three bonus issues. 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.

ITC Demerger:

Apart from this, ITC's ordinary shareholders are scheduled to meet on June 6, 2024, 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.

The split-up of the hotel business from ITC will be in the ratio of 10:1. Meaning, for every (Ten) Ordinary Share 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 implementation of the Scheme, the shareholders of ITC will directly hold about 60% of ITC Hotels, proportionate to their shareholding in ITC. The balance stake of about 40% will be held by ITC.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.