Last updated: July 05, 2023, 1:45 PM IST
ITC shares rise to a new high
Shares of ITC rose 3 percent on Wednesday, hitting a new 52-week high; What investors need to know
Shares of ITC rose 3 percent on Wednesday, hitting a new 52-week high as sources told CNBC-TV18 that the process to spin off the hotel business is underway.
“ITC is exploring alternative hotel business structures,” sources told the channel.
Following the news, ITC shares rose more than 3 percent to hit a new high of Rs 480.60 on BSE.
At 11:15 am, the share was trading at Rs 478.60 on the NSE, up 2.63 per cent from the previous close. A current market darling, the ITC stock has so far already achieved a 43 percent return in 2023.
Today’s report comes days after global brokerage firm Nomura also reported that the divestment of ITC’s hotel business is imminent and that the company is evaluating several alternative structures such as REIT and JV to ensure the divestment is cost and tax effective.
“The hotel industry is witnessing a strong improvement in ARR (average room rental), with travel and tourism activity (including business and foreign inbound travel) returning to pre-Covid levels. No major investments planned for the company as ITC has moved to an asset entitlement model; and current hotel margins are sustainable over the medium term,” Nomura analyst Mihir Shah said in a report last month.
Nomura has a target of Rs 485 on the stock, while Jefferies sees the stock rise to Rs 520 in the next 12 months.
Recently, foreign brokerage firm Jefferies raised the target price of ITC to Rs 530 from Rs 520 in its shift to asset-right strategy for hotels.
“ITC Hotels is the second largest listed chain. We multi-peg 18x EV/Ebitda discounting our fair value to the leader, Indian Hotels at 23x. Accordingly, we are raising ITC’s target price,” Jefferies said in a June 27 report.
“Cigarette margins are expected to increase ~120 bps in FY23-25E as consumer price increases should more than offset tax increases. We use the SOTP methodology to value the ITC cigarette business at 27x Mar-25 revenue, new FMCG at 5x Mar-25 sales, agri and board companies at 15x Mar-25 EPS, and hotels at 1x Mar-25 invested capital to to reach a price target of Rs 520,” it said.
With an increase of more than 44 percent year-to-date in calendar year 2023, ITC stock is the second best performing Nifty asset after Tata Motors. In the past two years, the stock has more than doubled investor wealth.
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