ITC has emerged as one of the best-performing stocks among Nifty 50 constituents in the current year so far with a rally of 26.60% and has also showcased consistent performance in the last 14 months.
The stock delivered a strong performance in FY23, cementing its position as the top performer within the Nifty 50 index with impressive returns over 51.50%.
During the past 14 months, the stock has shown positive gains in 12 of those months, indicating a consistent upward trend. Among these months, March 2022 stood out as the best performer, with a notable rally of 16.12%. Following closely behind, April 2023 recorded a solid return of 11%.
On April 17, the shares of ITC broke the 400-mark for the first time and have since maintained that significant level. Furthermore, on May 08, the stock reached a new all-time high of ₹433.45 apiece.
Despite such solid gains, brokerage firm Sharekhan said that stock valuations look attractive against the backdrop of consistent earnings growth visibility and a good dividend payout (a dividend yield of 3.7%).
This optimism stems from the company's robust performance in the March quarter. The brokerage stated that the company's Q4FY23 performance was ahead of its expectations mainly on account of better-than-expected OPM, resulting in strong 20% growth in adjusted PAT to Rs. 5,032.9 crore.
The company's cigarette, non-cigarette FMCG, and hotel businesses delivered stellar performances in Q4. The hotel business grew by 2x YoY to Rs. 781 crore. Non-cigarette FMCG business segment grew by 19.4% YoY to Rs. 4,945 crore, while Cigarette business revenue grew by 14% YoY to ₹7,335 crore.
The hotel segment experienced strong revenue and profit growth, driven by factors such as weddings, leisure activities, MICE (Meetings, Incentives, Conferences, and Exhibitions) events, and an increasing trend in business travel.
In contrast, agribusiness declined by 18% YoY to ₹3,578 crore on a high base in Q4FY22. The paper, paperboard, and packaging (PPP) segment registered muted 1.8% YoY revenue growth in Q4.
Restrictions imposed on wheat and rice exports impact Agri-Business segment revenue. The softening of pulp prices, muted demand mainly in global markets, and a relatively higher base impacted the YoY segment revenue growth of the PPP business.
Overall, ITC’s revenue grew by 6.5% YoY to Rs. 17,635 crore in Q4 FY23, ending FY23 with a total consolidated revenue of Rs. 70,937 crore, a growth of nearly 17%. Net profit surged by 25.31% to ₹19,427 crore in FY23. It had reported a net profit of ₹15,503 crore in the year-ago period.
Going forward, ITC is expected to maintain its volume growth momentum in the cigarette business in the upcoming quarters, thanks to the absence of any substantial tax hikes on cigarettes, said the brokerage.
Furthermore, the strong growth in the non-cigarette FMCG business and the impressive recovery in the hotel business are anticipated to drive double-digit revenue and profit after tax (PAT) growth for ITC over the next two years, it added.
The brokerage kept its 'buy' rating on the stock with a price target of ₹485 apiece. The brokerage said ITC remains their preferred picks in the large-cap FMCG space.
ITC is a large-cap stock with a market capitalization of ₹5,21,790 crore. It is one of the largest diversified players in India, present in businesses such as cigarettes, FMCG, hotels, and paper.
The company is the market leader in the domestic cigarette and PPP segments, and it is also the second-largest hotel chain by revenue and profitability, with a strong room inventory.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.