Shares of ITC hit their 52-week low of ₹207 on February 24, 2022. Since then, the stock has been on a solid upward journey; the stock is now 67% up from the 52-week low level.
On September 23, the stock touched its multi-year high of 349.50 in intraday trade before closing 0.33% higher at ₹346.25.
Analysts and brokerages believe the stock may continue its northward journey going ahead. For example, brokerage firm Centrum Broking expects the stock to touch the target price of ₹424, which is a 23% upside from the stock's September 22 closing of ₹345.10 on BSE.
Fundamentals are well in place to support the stock's upward journey.
Centrum pointed out that ITC’s FMCG-foods scale-up has all ingredients to drive a long-term trajectory.
"We reckon FMCG-foods now cover nearly 70 lakh outlets and its direct coverage increased 40% year-on-year (YoY). Moreover, with successful product innovation and democratisation of premiumisation across the cigarette segment, we expect ITC to execute selective price hikes (the last hike was taken two years before). That said, with strong volume uptick and relative stability in taxation, we expect double-digit EBIT growth for cigarettes in FY23, yet FMCG to inch up +9% EBIT margin soon," said Centrum.
With improving operating metrics and bounced back in the hotel business, Centrum expects improved occupancy with +20% ARR (average room rate) resulting in a profitable demerger soon, said Centrum.
Centrum believes paper business demand is fuelled by end-user segments, though input prices remain inflationary resulting in a strong performance in FY23.
Moreover, the brokerage highlighted that the ITC-MAARS initiative is driving agribusiness by promoting ‘Climate-Smart-Agriculture’ focusing on value-add portfolios and select export opportunities.
"We believe benign tax-regime, coupled with selective price increases, cigarette division to report double-digit EBIT growth in FY23. However, FMCG-Foods business scale-up driven by distribution expansion could lift margin trajectory, while performance for hotels, agri and paper driven by improved economic activities," said Centrum Broking.
"Given ITC’s refreshed strategy coupled with improved macro and the microenvironment we expect ITC to outperform its peers. Considering strong performance, we have increased FY23E and FY24E earnings by 6% and 6.3%, respectively, and retain a 'buy', with a revised DCF-based target price of ₹424, implying 25.4 times average FY24E and FY25E earnings per share (EPS)," Centrum said.
However, increase in any form of taxation, higher leaf tobacco prices and delayed recovery in the economy remain risks.
Considering the technical factors for the stock, on the monthly scale, it has broken its all-time high of ₹305.60 in the previous month. At the current juncture, ITC is in super bullish mode.
"According to the harmonic ratio, the next resistance stands around 1.272 ratios (i.e. ₹358 levels), followed by 1.618 ratios (i.e. ₹385 levels). So any dip will provide buying opportunity in ITC," said Jigar S. Patel, Sr. Manager - Equity Research, Anand Rathi Share and Stock Brokers.
"Monthly RSI and monthly stochastic, both have entered into an overbought zone which is very positive for the counter. The monthly average directional movement index is at 36 levels which is adding further confirmation for the upside. So, ₹320 would be credible support in coming sessions. Fresh buying in the counter is advisable at the current market price in small tranche and add another tranche at around ₹325-330 (if retested) and one can expect upside till ₹380," said Patel.
According to a MintGenie poll, an average of 34 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
