Heavyweight FMCG stock, ITC Ltd extended its bearish tone in 2024. In the trading week that ended on June 21, ITC stock tumbled by over 2.2%, with a month-on-month drop is nearly 4.6% on BSE. This led to over 10% drop year-to-date. Firstly, ITC stock which turned ex-dividend in June will pay a final dividend of 750% in July. Secondly, ITC is trending for its demerger of the hotel business which will be carried in a 10:1 ratio. Prabhudas Lilladher is the latest to recommend ITC stock.
ITC Share Price:
By the end of the June 21 session, ITC stock ended at Rs 419.60 apiece, down by 0.9% on BSE with a market cap of Rs 5,23,858.91 crore. Earlier, the stock held around Rs 430 levels, but due to selling pressure erased that resisting point to dip below Rs 420.
On June 15, the stock was at Rs 429.40 level and has now dropped by 2.3% to the latest price. In a month, ITC is down by 4.6%, and half-yearly performance is also lower by 7.8%.
The stock's 52-week high and low are at Rs 499.60 apiece and Rs 399.30 apiece respectively. ITC shares have been dragging for quite some time now, and are still undervalued in the FMCG sector.
ITC Demerger:
In a board meeting on June 6, the company received approval from shareholders for the demerger of the hotel business which will be in the ratio of 10:1.
The demerger is in the split ratio of 10:1. Because as part of the merger process, 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 completion, ITC's stake will be reduced. 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.
At the latest development, as per reports, ITC's Hotel Group has signed two Storii resort deals in Rajasthan, continuing on its high growth trajectory.
Also, after the board meeting on June 7, ITC Hotels, Sanjiv Puri, ITC Chairman in an interview with Hindu Businessline, said that ITC Hotels will have a strong debt-free balance sheet with a net worth of nearly ₹10,000 crore, which it can leverage to raise capital from the debt and/or equity markets going forward should such a need arise."
In the interview, he further added, "ITC Hotels - which operates over 135 properties in over 80 locations - will continue to leverage several institutional strengths of ITC, including its corporate brand reputation, globally acclaimed sustainability credentials, high-quality talent pool, digital capabilities, robust governance, systems and processes, sourcing of quality products, etc."
ITC Dividend:
On June 4, the day of election results, ITC shares turned ex-dividend for its final dividend of Rs 7.50 per Ordinary Share of 1/- each for the financial year ending 31st March 2024. ITC informed that the final dividend will be paid between Monday, 29th July 2024 and Wednesday, 31st July 2024 to those Members entitled thereto
This dividend will be in addition to an interim dividend of Rs 6.25 per share. Together, ITC will pay up to Rs 13.75 dividend per share for the entire FY24. 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 Rs 17,162.99 crores.
BUY/SELL ITC Shares?
At the latest, Vaishali Parekh, Vice President - Technical Research, at Prabhudas Lilladher said that ITC LTD has been in the consolidation phase for quite some time after the gradual rise from the bottom made at around 400 levels and made a higher bottom formation pattern in the daily chart. A decisive close above the 200 DMA level of 440 is expected to rise further to 480-500 levels in the coming days.
Parekh added, that the indicators have turned favourable, with the RSI showing a trend reversal, indicating a good revival from the oversold zone, and is on the rise, showing a positive bias. With good volume participation witnessed, we recommend a buy in this stock for an upside target of 480 - 500, keeping a stop loss of 400.
According to Motilal's latest update, ITC's 4QFY24 results update includes a healthy core business performance. Cigarette and FMCG segments showed healthy performance, while non-consumer businesses remained weak. Despite competitive pressure and weak demand, ITC reported an EBIT margin expansion. The paper business was hit by demand issues, competition from China, and higher input costs. Also, Hotels posted a robust performance with strong ARR and occupancy.
Hence Motilal Oswal reiterated BUY on ITC shares for a target price of Rs 515.
The highest target is set by Religare Broking. In its latest note, the brokerage said, "ITC reported mixed numbers for the quarter. The management believes, that improved demand from rural areas will augur well for a revival in consumption demand, along with that they plan to focus on the FMCG segment with innovation and premiumization and at the same time increase spending towards brand building, expanding distribution & channel reach while maintaining cost. Meanwhile, the company is waiting for shareholders' approval for the hotel de-merger plan and it is positive for shareholders."
Religare's note added, "Overall, we expect growth to be continuously driven by the cigarettes & FMCG segment and remain positive on the growth prospects ahead. On the financial front, we have estimated its revenue/ EBITDA/PAT to grow at 11.4%/12.9%/13.3% CAGR over FY24-26E. Thus, maintaining our Buy rating and a target price of Rs 535."
Meanwhile, Antique Stock Broking has suggested BUY for a target price of Rs 511.
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.
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