Analysts on D-Street have turned bullish on the stock and believe it is ripe for further gains.
Latest to join the local brokerage group
Service. In its latest report, the brokerage firm has upgraded the stock’s rating to ‘Buy’ with a target price of Rs 335, signaling a potential upside of more than 27% from its previous close of Rs 263.50.
Brokerage says better-than-expected demand recovery, strong margin outlook in tobacco, strong sales momentum in FMCG, softening hotel business drag and better capital allocation in recent years will have positive implications for the stock.
It also added that the stable tax environment for tobacco in recent years has allowed the ITC to adjust price increases to avoid demand disruptions and that this trend is likely to continue and will lead to an improvement in the volume of cigarettes. tobacco consumption and income in the medium term.
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Speaking of valuations, ITC said it’s still trading at a 27% discount from its January 2019 valuation of 25.4 times forward EPS. It believes the premium multiple is reasonable, given its strong mid-term visibility and the defensive nature of its business, especially in a volatile macro environment.
In addition, it said ITC’s 80-85% return policy was reiterated by management at a recent analyst meeting in December 2021 and that lower investment capital requirements will leads to better free cash flow and higher payouts.
The brokerage adds that ITC’s higher dividend yield (4-5%) makes it an ideal defensive option in today’s volatile interest rate environment.
The recent rally in share prices has been accompanied by an increase in the arrival rate of foreign portfolio investors (FPI) after four quarters of selling. The data shows that FPI ownership in ITC, which was at 13.31% in December 2020 has increased to 11.9% in Q3.
Recently, analysts at
The securities company also started reporting on ITC with a ‘Buy’ rating with a target price of Rs 350. ITC is one of the few stocks offering strong growth opportunities with an attractive dividend yield of 4.19%, it said.
The FMCG giant reported a 11.80% year-on-year increase in standalone net profit at Rs 4,190.96 in Q3 with a 16.02% increase year-on-year at Rs 16,426.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. They do not represent the views of the Economic Times)