ITC shares fall more than 2% as Q2 numbers fail to impress D-Street; Do you need to invest? – News18

Shares of ITC fell 2.3 percent to the day’s low of Rs 440 on the NSE despite reporting better-than-expected June quarter earnings. The Street remained unimpressed as selling pressure weighed on FMCG stocks, dragging the broader Nifty as well.

ITC’s share price has risen around 31 per cent in the past year, compared to an 11 per cent rise in equity benchmark Sensex. The stock touched its 52-week high of Rs 499.60 on July 24 this year and its 52-week low of Rs 325.35 on December 23 last year on the BSE.

ITC on October 19 reported 6.02 percent year-on-year growth in consolidated net profit at Rs 4,898.07 crore in Q2FY24. On the other hand, consolidated gross sales rose 3.84 percent year-on-year to Rs 19,137.51 crore during the quarter under review.

ITC’s growth in the September quarter was led by cigarette and hotel segments. Moreover, the company reported strong performance in its FMCG segment with segment revenue increasing 8.3 percent year-on-year in the second quarter of FY24.

What should investors do?

Most of the brokerage firms maintained their positive view on ITC stock after the company’s impressive show in cigarette and FMCG segments.

Motilal Oswal maintained its buy call on ITC stock with a target price of Rs 535, implying an upside target of 19 percent, and said ITC’s earnings visibility remains better than peers.

“At a time when uncertainty hangs over the industry, led by high inflation, unpredictable monsoons and continued weak rural sales, the recovery in ITC’s cigarette volumes offers decent earnings visibility at reasonable valuations and an attractive dividend yield,” said Motilal Oswal.

Nuvama Wealth Management maintained its buy call on the ITC stock with a target price of Rs 560, implying an upside of 24 percent over Thursday’s (October 19) closing price of Rs 450.30 on the BSE.

Nuvama pointed out that ITC showed decent growth in most segments. It expects legal cigarette players to gain market share from illegal players (nearly one-fourth of the market) given a nominal tax increase in the union budget for FY24, followed by two consecutive years of tax-free increases.

As the largest legal player, ITC would be a major beneficiary, Nuvama said.

In the FMCG sector, the company would like to see market share gains across most categories. The expansion of the EBITDA margin is on the right track.

“ITC continues to gain in the cigarette market while the organized share is rising. Other segments have scaled up with portfolio and network expansion, which bodes well for the company,” Nuvama said.

Nirmal Bang too has maintained a buy call on the stock with a target price of Rs 525.

The brokerage firm pointed out that ITC’s cigarette volume growth of about 4 percent year-on-year was much better than the estimate of a 2 percent year-on-year decline. Thus, cigarette volumes remained resilient at a four-year average in the mid-single digits, much higher than the flat to declining trends of the past.

Cigarette EBIT growth was healthy at 8 percent year-on-year and is expected to remain healthy in subsequent quarters as well, Nirmal Bang underlined.

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