ITC hits fresh 52-week high; stock surges 17% in one month

Shares of ITC hit a fresh 52-week high of Rs 315, up 2.5% on the BSE in early morning trade, extending gains of the past 4 weeks after the company’s June quarter net profit beat the Street estimates.

The stock of fast moving consumer goods (FMCG) company was the largest gainer among the S&P BSE Sensex at 09:38 am. It outperformed the market by surging 17% in past one month, as compared to a 4% rise in the benchmark index.

ITC, with Rs 3.84 trillion market capitalisation, was 4% away to hit Rs 4-trillion market-cap once again. It touched an all-time high of Rs 353 on July 3, 2017, on the BSE in intra-day trade.

ITC had reported a 10% year-on-year jump in net profit at Rs 28.19 billion in June quarter (Q1FY19). The net profit growth during the quarter was driven by robust performance across most segments. On a comparable basis, gross sales value (net of rebates/discounts) for the quarter stood at Rs 181.72 billion, representing a growth of 13.5% driven mainly by the agribusiness, FMCG-others and FMCG-cigarettes segments.

The brokerage houses have maintain ‘buy’ rating on the stock with 12-month target price in the range of Rs 350 to Rs 367 per share.

“The Q1FY19 result of ITC was on a recovery path. We believe that the re-stocking post GST, improved performance of Cigarette segment and double-digit growth in the Non-Cigarette FMCG, Hotels and Agri segment led to growth in the top-line,” analysts at KR Choksey Institutional said result update.

“We believe ITC has created a brand image with its strong product portfolio and would post its revenue CAGR around mid-single growth rate in FY19E & FY20E with growth driven mainly by its FMCG and other businesses. Its EBITDA and PAT margins will be stable at around 38% and 26%, respectively,” the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 350 per share.

“ITC has consistently improved cigarette performance after seeing a steep rise in taxes in FY18. As per the management, cigarette volume trajectory is gradually improving. Therefore, we believe ITC can deliver low-mid single-digit volume growth in the coming 3-4 quarters supported by favourable base (-6/-4-3% in 2Q/3Q/4QFY19) and expectation of no steep rise in taxes (healthy GST collections),” according to analysts at HDFC Securities.

ITC is the market leader in cigarettes (>80% by value), notebooks, valued-added paperboards and a significant player in biscuits. Our long-term positive stance on ITC derives from its status of being the cheapest consumer large-cap stock in India, the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 367 per share.