Shares of ITC jumped more than 4 percent in intraday trade to hit their fresh 52-week high of ₹285 on BSE on July 4 in an otherwise weak market.
The stock finally settled 3.99 percent higher at ₹284.35 while the benchmark Sensex ended 0.21 percent lower at ₹52,907.93.
The stock has been witnessing remarkable traction this year while the market has been under pressure. The stock of ITC has gained about 30 percent this year so far (YTD) against a 9 percent fall in the benchmark Sensex.
Despite such strong gains in a volatile market, analysts and brokerage firms are still positive about the stock. They have retained their positive view on the stock after the company disclosed its FY22 annual report which portrayed a positive outlook for most sectors.
ITC’s earnings CAGR at the PBT level stood at 5 percent over FY17-22, and brokerage firm Motilal Oswal Financial Services expects it to post 15 percent earnings CAGR over FY22-24.
The brokerage firm has a 'buy' call on the stock with a target price of ₹335 which is an 18 percent upside from the stock's July 1 closing price of ₹284.35 on BSE.
"Better-than-expected demand recovery and a healthy margin outlook in cigarettes, healthy sales momentum in the FMCG business, lower drag from the Hotels business, and better capital allocation in recent years lead us to turn constructive on the stock," said the brokerage firm.
Motial Oswal pointed out while valuations of global Tobacco peers have been restored to their prepandemic levels (Jan’19), ITC still trades at a 24 percent discount to its January 2019 valuation of 25.4 times one-year forward earnings per share (EPS).
"We value ITC at 21 times FY24E EPS, implying a 65 percent premium to its global peer average. We believe the premium multiples are justified, given its strong visibility over the medium term and the defensive nature of its business, especially in a volatile macro environment," said the brokerage firm.
Tirthankar Das, Head of Technical Research at Ashika Group pointed out that ITC has witnessed a strong buying demand from the crucial support area of ₹252-255 being the confluence of the 61-day exponential moving average (EMA), currently placed at ₹262 and the rising demand line joining lows of May 2022 ( ₹249) and June 2022 ( ₹258) signalling strength and positive price structure.
"The stock in the recent period has registered a bullish ‘flag’ breakout and is on the verge of breaking past the last one-month range ( ₹260-280) signalling resumption of an up move and offers fresh entry opportunity. The stock has immediate support at ₹262-264 being the 61.8 percent retracement of the CY22 up move ( ₹207-283)," said Das.
"On the oscillator front, the daily MACD is in an uptrend and has recently generated a buy signal thus validating positive bias. Hence if prices sustain above ₹264 then a further up move is likely and head towards ₹295-300 in the coming sessions as it happens to be the 150-161.8 percent external retracement of the last decline ( ₹283-258)," Das said.
"We continue to remain positive on ITC, especially with the economy moving towards normalcy. Further, the absence of a tax increase on the cigarette in Budget 2022 also gives confidence in sustaining cigarette volume growth. We value ITC on a SoTP basis to derive a target price of ₹285 (implied P/E of 20 times Mar-24E EPS)," said Deepak Jasani, Head of Retail Research, HDFC Securities.
An average of 34 analysts polled by MintGenie 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.
