FMCG ITC which recently received shareholders' approval for a demerger in the ratio of 10:1, has emerged among the top picks of mutual funds as well. The large-cap stock has been resisting between Rs 430-440, and brokerage Motilal Oswal has recently recommended BUY for a target price of Rs 515. There is a potential upside of nearly 20% in ITC shares ahead in the near term.
ITC Share Price:
ITC share price ended flat at Rs 432.25 apiece, on BSE with a market cap of Rs 5,39,652.09 crore. The stock's 52-week high and low is Rs 499.60 apiece and Rs 399.30 apiece.
As per BSE data, ITC stock's price-to-equity ratio is at 26.43x, with a return on equity (RoE) of 28.27%. YTD, the stock has dropped by 7.5%. The FMCG stock is broadly undervalued compared to the sector.
ITC Top Picks:
As per Phillip Capital, in the large-caps, ITC stock was among the top five picks of mutual funds. The mutual funds exchanged up to 40,714,474 shares of ITC. Sector-wise as well, mutual funds had high exposure in the staples industry which included shares like ITC, Marico, Dabur, HUL and Jyothy Labs.
Motilal Oswal Recommends BUY On ITC:
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.
Further, Motilal's note added, " Reiterate BUY with an SOTP-based TP of INR515 based on 28x FY26E P/E."
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.
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.
In the fourth quarter of FY24, the company's consolidated net profit stood at Rs 5,190.71 crore, 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.
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