Buy This Stock For Over 15% Potential Gains and Robust Performance, Declares Dividend Of 625%

Edelweiss Research, a brokerage firm has put a buy call on the stocks of ITC Ltd for a target price of Rs 325. Looking at the CMP and the target price, the investors can expect over 15% potential gains in 12 months. The brokerage, in its latest report also commented on what they like and what they don't like about the company's performance.

Stock Outlook

The stock CMP closed on 20th May 2022 is Rs 280.05 per share. The brokerage has set a target price of Rs 325 for 12 months, investors can expect potential gains of 15.86%. In the last 1 year, the share price of the company has gained 34.9%. It touched the 52 week low at Rs 200.90 on 09 July 2021 and the 52 weeks high at Rs 282.35 on 20 May 2022.

For the fiscal year ending March 31, 2022, the company's board of directors recommended a final dividend of Rs 6.25 (625%) per ordinary share of Rs 1 face value. It will be paid between July 22nd and July 26th, 2022.

Financials

Year to March	Q4FY22	Q4FY21	% Change	Q3FY22	% Change
Net Revenue	155309	132947	16.8	158623	-2.1
EBITDA	52244	44730	16.8	51021	2.4
Adjusted Profit	41910	37484	11.8	41562	0.8
Diluted EPS (INR)	3.4	3	11.7	3.4	0.8

Robust Performance, Good showing across segments

The brokerage has said, "ITC's Q4FY22 net revenue (up 16.8% YoY), EBITDA (up 16.8% YoY) came in ahead of our estimates, while PAT (up 11.8% YoY) was in-line. Aided by improved mobility, cigarette volumes rose by ~9% YoY on a base of 8%, surpassing pre-pandemic levels and also saw an improvement in mix. FMCG revenue grew 12.3% YoY on a base of 15.8%. ITC has declared a dividend of INR6.25/share taking the full-year dividend to INR11.5/share. The agri and paperboard businesses continued their stellar performance."

Brokerage's Comments and Views

Commenting on what they liked, the brokerage said, "Revenue and EBITDA came in ahead of estimates. ITC declared dividend of INR6.25/share. Agri/Paperboards businesses saw strong growth of 29.6%/31.8% YoY. FMCG's EBITDA margin expanded 75bp to reach 9%. The company's digitally powered eB2B platform, UNNATI, was rapidly scaled up during the year covering nearly 0.3mn outlets within a short span of time. E-commerce saliency reached 7%. Hotels (up 35.4% YoY) witnessed recovery led by focus on domestic leisure and weddings segment." The brokerage has also stated what they don't like, it said, "The hotel business recorded INR 342mn EBIT loss. Although education and stationery products posted some recovery, it is still below pre-pandemic levels."

Outlook and valuation: Positive; maintain ‘BUY'

The brokerage stated, "In light of no tax hike for a second consecutive year in the union budget, 4.5-5% dividend yield, strong momentum in the agri and hotels businesses and overall limited downside, we retain 'BUY/SO' on the stock with a Target Price of INR325. The stock is trading at 18.8x FY23E EPS."

Disclaimer

The stock has been picked from the brokerage report of Edelweiss Research. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.