625% Upcoming Dividend: At 3.54% Yield ITC Stock Is Recommended By Prabhudas, Motilal; 11-18% Rise Ahead

Cigarette maker, ITC Ltd is a hot bet for your portfolio after its Q3 earnings report for FY24. Not just that ITC is also set to reward shareholders with a hefty interim dividend to the tune of 625%. Brokerage Motilal Oswal recommended buying ITC over its resilient performance in the FMCG segment during the quarter, while Prabhudas Lilladher suggested ACCUMULATE the share owing to estimates of FMCG and IT services to add to shareholders' value ahead.

ITC Share Price:

ITC's share price on BSE dived by nearly 3% to hit an intraday low of Rs 437.25 apiece after cigarette volumes missed estimates in Q3FY24. The stock price ended at Rs 438 apiece, down by 2.7% on BSE with a market cap of Rs 5,46,585.24 crore.

ITC Dividend:

ITC's board of members on January 29 declared an interim dividend of Rs 6.25 per ordinary share having a face value of Re 1 each for the financial year ending on 31st March 2024.

Such dividend will be paid between Monday, 26th February 2024 and Wednesday, 28th February 2024 to those Members entitled thereto.

Eligible shareholders will determined on February 8, 2024, which is the record date for interim dividend. The stock will also turn ex-dividend on this day.

Currently, ITC has a dividend yield of 3.54%.

ITC Q3 Results:

In Q3FY24, the company posted a PAT of Rs 5,572 crore, registering a growth of 10.8% from Rs 5,031 crore in the same period a year ago. Gross revenue came in at Rs 17,483 crore, up by 2.1% YoY. While EBITDA came in at Rs 6,024 crore in the quarter, down by 3.2%.

On segment-wise performance, resilient performance in FMCG - Others amidst subdued demand conditions with revenue up 7.6% YoY on a high base and CAGR at 12.8%. Cigarettes Segment witnesses consolidation on a high base after a period of sustained growth momentum with revenue and PBIT up 2.3% YoY. Best quarter for the Hotels segment with revenue and PBIT up 18% and 57% YoY respectively. However, Agri Business Segment was impacted by trade restrictions on agri commodities with a 2.2% YoY decline, however, revenue surged by 14.2% YoY.

Brokerages Call On ITC:

Motilal Oswal On ITC For TP Of Rs 515, Potential Upside: 16.6%

According to Motilal's note, there are no material changes to our EPS estimates for FY24, while the brokerage trimmed FY25E EPS by 6.2%. Further, 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.

On valuation, Motilal's note said, "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. We reiterate our BUY rating with a TP of Rs 515, based on SoTP valuation.

Prabhudas Lilladher On ITC For TP Of Rs 489, Potential Upside 11.64%.

PL's analysts note said, "Demand scenario remains mixed with mass segment under pressure across cigarettes and FMCG. We expect 4.3/4% cigarette volume growth in FY25/26 in a steady state while FMCG will continue to expand margins by 100bps. Although Hotels have a high base, revival of business and foreign tourist flow will cushion the performance in FY25. Outlook on Paper remains muted in near term given high input costs of wood and pressure on end product prices due to Chinese dumping.

Further, PL's note said, "We are largely retaining our estimates and estimate 7.5% EPS CAGR over FY24-26. We believe FMCG and IT services will add significant shareholder value over coming few years. ITC trades at 23.4x FY26 EPS with ROE/ROCE of 31.4/41.7% and ~80%+ dividend payout. We assign SOTP based target price of Rs489 (Rs487 earlier) as we roll forward to Dec25. We expect returns to be back ended given tepid EPS growth despite favorable valuations. Retain Accumulate."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor 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.