ITC Shares Rising: Shares of ITC Ltd continue the upward trend, with the share rising to a 3-year high in Monday’s early session when it rose more than 2 percent to Rs 290 apiece on the BSE, the highest since 2019 ITC stock is up 30 percent. so far in 2022 to its highest level this year compared to the 9 percent drop in the benchmark Sensex, which has emerged as one of the biggest winners among the bluechips at a time when the market value of several companies has declined due to the declining trend. investor interest in risky assets. The company’s stock of diversified fast-moving consumer goods (FMCG) traded at its highest level since May 2019, rising 7 percent in the past two trading days.
A stable tax environment for cigarettes in recent years has allowed ITC to calibrate price increases to avoid a demand distortion. Analysts expect this trend to continue and should lead to better cigarette volumes and earnings visibility in the medium term.
For the January-March 2022 quarter (Q4FY22), ITC had reported strong results, with cigarette volume growing by approximately 9 percent. The cigarette segment recovered with volumes surpassing pre-pandemic levels thanks to the gradual normalization of economic activity and concerted actions to strengthen market position through strategic portfolio interventions and improve product availability, supported by superior on-site execution.
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Analysts said the maker of Bingo chips and Gold Flake cigarettes is becoming a major attraction among investors as it is less affected by input cost inflation, has a high dividend yield, growing consumer business and recovering hotels, along with strong growth prospects in the cigarette industry. , which is the mainstay.
“Over 80% of its profits come from cigarettes and in the consumer sector this is one of the few stocks relatively well insulated from commodity cost inflation,” said Gautam Duggad, head of research – Institutional Equities at Motilal Oswal Financial Services. “The recovery in the cigarette trade continues and the stock is trading at a significant discount to the industry despite strong payouts and free cash flow generation.”
Motilal Oswal Financial, which recently upgraded the shares to buy at a target price of Rs 335, said the shares are still trading at a 27 percent discount from valuations of 25.4 times annual earnings per share in January. 2019.
While Prabhudas Lilladher analysts expect near-term margin pressure in FMCG, strong traction in other companies will enable ITC to deliver double-digit earnings growth. The brokerage firm has increased its valuation of cigarettes from 15x from 15x to 16x due to the improvement in growth and stable taxes despite long-term risks. It has also awarded higher multiples for FMCG and paper trading. It has a price target of Rs 305 per share.
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