Shares of ITC hit their fresh 52-week high of ₹316.65 in intraday trade on BSE on August 2, a day after the company reported a 33.46% increase in consolidated net profit to ₹4,462.25 crore for the first quarter ended June 30, 2022.
The company had posted a net profit of ₹3,343.44 crore during the April-June quarter of the previous fiscal, it said in a regulatory filing.
Its revenue from operations was up 39.25 per cent at ₹19,831.27 crore in the first quarter of the current fiscal compared to ₹14,240.76 crore in the year-ago period.
In the last one year, the stock has jumped 53% on BSE.
Brokerages upbeat
Many brokerage firms cheered ITC's Q1 numbers and highlighted that the company posted strong performance across segments.
Edelweiss Securities, which maintained a 'buy' call on the stock and raised the target price to ₹357 from ₹340, pointed out that ITC's cigarettes saw green shoots of volume from illicit trade, tax stability and portfolio interventions and execution. FMCG saw growth from both OOH/discretionary and staples as well as the resurgence in Education and Stationery products business. Despite inflationary pressures, ITC sustained an EBITDA margin of 7.8% (+190bps vs Q1FY20) led by proactive measures.
Hotels reported EBITDA of ₹1.8 billion led by strong revival, higher RevPAR (revenue per available room), operating leverage and structural cost interventions. Paperboards revenue grew 43% YoY led by a higher realisation, capacity expansion and strong exports. Agribusiness reported a robust 83% YoY growth led by wheat, rice and tobacco exports. IT progressed with momentum, at a 12% CAGR over three years, Edelweiss highlighted.
"ITC continues to leverage its extensive portfolio and network as it drives growth and market share gains, thereby further cementing leadership. We are increasing FY23E and FY24E EPS (earnings per share) by 8.8% and 8.5%, respectively," said Edelweiss.
Motilal Oswal Financial Services also maintained a 'buy' call on the stock with a target price of ₹355. The brokerage firm has increased FY23 and FY24 EPS estimates by 3% and 4% respectively.
"If not for the significant compression to other income from the mark-to-market impact on bond investments in Q1FY23, the increase in our EPS forecasts would have been higher. We have turned constructive on the stock, led by: (a) a better than expected demand recovery and a healthy margin outlook in cigarettes, (b) robust sales momentum in the FMCG business, (c) lower drag from the hotels business, and (d) better capital allocation in recent years," Motilal Oswal said.
Brokerage firm Prabhudas Lilladher has an 'accumulate' call on the stock with a target price of ₹327.
Prabhudas Lilladher said although it expects another quarter of margin pressure in FMCG, strong traction in other businesses will enable ITC to sustain double-digit profit growth.
"ITC trades at 21 times FY24 EPS with 10.1% EPS CAGR over FY22-24. We note ROE and ROCE of 27% and 33% and about 80%+ dividend payout are positives. We expect incremental returns to accrue in a more calibrated manner. Any punitive increase in cigarette taxes is a key risk to our call," Prabhudas Lilladher said.
Among the global brokerage firms, CNBC-TV18 reported that CLSA maintained an 'outperform' call on ITC with a target price of ₹330, citing the company as its preferred pick.
It raised FY23-24 earnings estimates by 8% to capture recovery. Recovery in mobility helps strong recovery in revenue and margin, CNBC-TV18 reported CLSA saying so.
Morgan Stanley maintained an 'overweight' call on the stock with a target price of ₹330. As per CNBC-TV18, Morgan Stanley said ITC's top line and EBITDA were ahead of estimates led by strong growth in the paper and agribusiness while cigarette performance was in-line with expectations.
According to a MintGenie poll, an average of 33 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.
