ITC hits new 52-week high, up 18% in 5 days; board to mull interim dividend

Shares of ITC extended their rally to the fifth straight day on Friday as the stock jumped 4 per cent to hit a fresh 52-week high of Rs 239 on the BSE in intra-day trade. The stock has surged 18 per cent in the past five trading days as there was no material announcement in the Budget that would significantly impact any of the consumer stocks. ITC had hit an intra-day high of Rs 239.25 on previous year Budget day, February 1, 2020.

Meanwhile, ITC today informed stock exchanges that the board of directors of the company will also consider a declaration of interim dividend for the financial year 2020-21 (FY21) in the forthcoming meeting. The company is scheduled to announce its October-December quarter (Q3FY21) results on Thursday, February 11, 2021.

Given the encouraging pace of recovery in the economy, the outlook for the consumer sector is immensely optimistic. The lack of additional GST or cess on cigarettes is seen as a minor positives for ITC, according to analysts.

“No tax or duty increases on cigarettes is relief for cigarette companies. We have seen stable taxation on tobacco post GST implementation in the last three years with only one year tax increase (only in 2020 Budget),” ICICI Securities said in Union Budget review 2021-22.

“During the GST regime, after about 40 GST meetings, there has been no change in the tax rates for cigarettes. For ITC’s FMCG business, Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin expansion is on track, and we forecast ITC would achieve and sustain a double-digit EBITDA margin over the next few quarters. The cigarette opportunity in India remains attractive given low per capita consumption,” analysts at Edelweiss Securities said in a stock update.

ITC saw strong growth during the July-September quarter (Q2FY21) within 75 per cent of its FMCG portfolio comprising foods, healthcare and hygiene (up 25 per cent YoY). The growth was supported by 70 plus new launches made by the company during 1HFY21, primarily in the hygiene category. The company also made several new launches within its food portfolio to capitalise on the increased demand for packaged food during the lockdown.

Despite steep taxation and price hikes, ITC has maintained its leadership in cigarettes. The company is driving volumes through innovative launches. It has also focused on improving operational efficiency, and it is ramping up its capsule manufacturing capabilities, HDFC Securities said in FMCG sector update.