India's largest FMCG giant, ITC is recommended to buy now and sell later after its Q4 results. The most-valued FMCG which is still trading under-valuation, is an attractive bet for long-term creation. But for the short term, investors are suggested to buy ITC for a 1-day target price of Rs 455 by Axis Securities. After Q4, the next big key trigger for ITC will be its final dividend of Rs 7.50 per share, while the demerger of ITC Hotels.
ITC Share Price:
On BSE, ITC shares ended at Rs 441.20 apiece on May 23, with a market cap of Rs 5,50,825.91 crore. The stock's 52-week high and low are at Rs 499.60 apiece and Rs 399.30 apiece respectively. YTD, however, ITC shares are down by nearly 6%, underperforming its sector.
In a year, ITC has only seen marginal gains, while in 5-years, the stock zoomed by 52%. Nonetheless, ITC's all-time gain is a whopping 8,131.34%.
ITC Dividend:
This FMCG giant's board recommended Final Dividend of 7.50 per Ordinary Share of 1/- each for the financial year ending 31st March 2024, subject to a declaration of the same by the Members at the ensuing 113th Annual General Meeting ('AGM') of the Company convened for Friday, 26th July 2024; the Final Dividend, if declared, will be paid between Monday, 29th July 2024 and Wednesday, 31st July 2024 to those Members entitled thereto.
The record date is fixed on June 2024 for the same.
While together with the Interim Dividend of 6.25 per Ordinary Share declared by the Board on 29th January 2024, the total Dividend for the financial year ended 31st March 2024 would be f 13. 75 per Ordinary Share off 1 /- each.
The total cash outflow on account of the Dividend (including the Interim Dividend of Rs 7,799.45 crores paid in February 2024) will be 17162.99 crores.
ITC Q4 Results:
The consolidated net profit of ITC stood at Rs 5,190.71 crore in Q4FY24, declining from Rs 5,406.52 crore in Q4FY23, and Rs 5,242.58 crore in Q3FY24. Consolidated revenue from operations was at Rs 19,446.49 crore, down from Rs 19,484.50 crore in Q4FY23, but marginally up from Rs 19,058.29 crore in Q3FY24.
In Q4FY24, its FMCG segment was up 7.2% on a high base and Segment PBIT was up 15% on a comparable basis (base quarter included certain fiscal incentives about previous periods); margins expanded 60 bps YoY on a comparable basis. While Full Year Segment Revenue and Segment PBIT are up 9.6% and 29.4% YoY respectively; margins expanded by 130 bps YoY.
In the case of the cigarettes segment, the Q4 revenue PBIT was up 7.0% and 5.0% YoY respectively. Full Year Net Segment Revenue and Segment PBIT are up 7.1% and 6.5% YoY respectively.
Moreover, ITC's hotel business posted record high performance. Here, Q4 Segment Revenue and PBIT are up 15% and 34% YoY respectively on a high base; the Segment EBITDA margin is up 340 bps YoY to 38.2%. Further, Full Year Segment Revenue and Segment PBIT are up 15.6% and 39.1% YoY respectively; the Segment EBITDA margin is up 295 bps YoY to 35.1%.
However, the Agri-Business Segment was impacted by trade restrictions on agri commodities with this segment's revenue de-grew 13.1% and 13.4% YoY in FY24 and Q4 respectively. Also, Paperboards, Paper and Packaging Segment remains impacted by low-priced Chinese supplies in international markets (including India), muted domestic demand, surge in wood cost and high base effect.
ITC 10:1 Split Ahead:
ITC is demerging its hotels business in the ratio of 10:1. Giving a demerger update, ITC said, " Post obtaining no-objection from stock exchanges, Scheme of Arrangement for demerger ('the Scheme') was filed with National Company Law Tribunal (NCLT). NCLT has directed convening a meeting of shareholders of ITC on June 6, 2024, to consider and approve the Scheme."
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
Post 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.
Other Key Factors:
1. 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.
2. 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.
Shortest Term Target On ITC:
Axis Securities has given a 1-day call on ITC, making it the shortest-term target on the stock. The brokerage said, BUY Now Sell Tomorrow for ITC.
The brokerage guides investors to enter ITC shares at Rs 440 price level for a target price of Rs 455 with a stop loss of Rs 434. The time frame for the target is 1 day.
As per the brokerage, in the last 1 year ITC Ltd Underperformed Nifty 50 by 25.13% (CAGR difference), while in the last 1 year, the volatility of ITC Ltd was Higher than Nifty 50 volatility by 0.5%. Further, for 2 out of the Last 12 Months, i.e. 17% of the time it has beaten Index returns.
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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