Patience is among the most important factors for success in stock investing. Investors of diversified conglomerate ITC saw their patience pay off as the stock significantly rewarded its loyal shareholders in the last three years. With a market capitalisation of more than Rs 4,70,000 crore, ITC is now India’s 9th largest company, leaving behind Dalal Street giants like Bharti Airtel, Bajaj Finance, Kotak Mahindra Bank, HCL Technologies, L&T, Asian Paints and Maruti Suzuki India Ltd.
At 12:15 on Thursday, the large-cap stock was trading 0.67 per cent higher at Rs 384.65 on BSE. The market cap of the firm rose to Rs 4,77,505.09 crore on BSE.
ITC on Dalal-Street
The share price of the Kolkata-based conglomerate hovered around Rs 200 odd level from 2013 to 2019. The stock even fell to Rs 147.20 on March 16, 2020, amid the worst market crash triggered due to Covid-19. However, it has recovered over 160 per cent from its Covid lows. Notably, ITC stock started its upward journey in February 2022 and even managed to outperform its peers. With more than 50 per cent rise (excluding dividends) in 2022, shares of ITC logged their best yearly gains in 17 years.
According to the data compiled by the corporate database AceEquity, ITC stock had rallied 62 per cent in 2005. The stock delivered double-digit returns (adjusted, not total return) in 10 instances. The best return was delivered in 2012 (42.47 per cent), followed by a 39.12 per cent return in 2010, and a 46.31 per cent return in 2009.
In the Budget 2023, Finance Minister Nirmala Sitharaman hiked calamity duty on cigarettes and tobacco products by 16 per cent. Tax tweaks matter to ITC as the company sells cigarettes. The stock took a beating initially but recovered sharply and was in fact among the top gainers soon after the fall.
Also read: ITC shares plunge 6%; Godfrey Phillips, VST tumble up to 8% as FM hikes calamity duty
Brokerages’ bullish stance on the stock
Experts’ bullishness on the stock is evident as they have price targets as high as Rs 475 on the stock. Sharekhan believes that valuations at 25 times FY23, 23 times FY24 and 20 times FY25 earnings per share (EPS) looks attractive in the backdrop of strong earnings growth visibility.
Phillip Capital says ITC is better placed against competition at least for the next few quarters as more than 80 per cent of the company’s profits are largely protected against FMCG peers, who are grappling with twin issues of lower volume growth and hyperinflation in raw material cost.
Jefferies, Goldman Sachs, Motilal Oswal Securities and Nuvama Institutional Equities have Rs 450 as price targets for the stock. JPMorgan sees the stock at Rs 425 while Morgan Stanley sees it worth Rs 415.
Nomura India expects FMCG, hotels, and paperboard to continue to witness improvement in business and margins supported by new launches, and reach expansion.
“Notably, cigarette industry volumes recovering to pre-covid levels and ITC re-gaining lost market share from its organized peers acts as icing on the cake,” it added.
Green Portfolio on Valuations
According to Divam Sharma, Founder, Green Portfolio, ITC attracted investors last year as its covid-impacted business was picking up and with liquidity being squeezed out of the markets, value stocks gained investor interest.
On a blended level, if you look at the current valuations, he said there was not much cushion left. “We do not see a significant PE re-rating in this company going forward unless there is a split of its businesses,” Sharma added.
ITC Financial performance
ITC reported a 21 per cent jump in net profit at Rs 5,031 crore for the December quarter compared with Rs 4,156 crore in the year-ago period. ITC’s revenue rose 2.3 per cent to Rs 16,225 crore in Q3FY23 as compared to Rs 15,862 crore in Q3FY22. The company declared an interim dividend of Rs 6 per share. The dividend will be paid on March 5.
Also read: ITC Q3 net profit rises 21% to Rs 5,031 cr, firm declares interim dividend of Rs 6 per share
For the quarter ended September 2022, ITC reported a 24.08 per cent rise in its consolidated net profit at Rs 4,670.32 crore. It posted a net profit of Rs 3,763.73 crore during the same quarter last year. ITC’s revenue from operations witnessed a 25.35 per cent jump to Rs 18,608 crore in the second quarter. Revenue in the year-ago period stood at Rs 14,844.38 crore.
In May 2022, ITC also declared a final dividend of Rs 6.25 for the financial year ending March 31, 2022.
From Imperial Tobacco Company to a Diversified Conglomerate
The company was incorporated on August 24, 1910, under the name Imperial Tobacco Company of India Limited. The beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company’s existence.
As the ownership of the company became progressively more Indian, the company’s name was changed, becoming the India Tobacco Company in 1970 and ITC Limited in 1974. From then on, as the company’s portfolio expanded beyond tobacco to include fast-moving consumer goods such as food, personal care products, clothing, stationery, incense and safety matches, among others, not to mention its booming hotel business, the company was rechristened ITC Limited, with ‘ITC’ no longer an acronym.
ITC has even placed its next bet on millets. According to the company, the nutritious food grain has the potential to open up a Rs 4 lakh crore market opportunity. Terming it a “future category” for growth, Sanjiv Puri, Chairman & Managing Director, ITC said the company was planning to use millets in multiple product categories and across ITC’s diversified businesses like hotels and agri-commodities businesses apart from packaged foods.
In January 2023, ITC announced that it would acquire Direct-to-Consumer (D2C) snack brand Yoga Bar. The 100 per cent acquisition of Sproutlife Foods Private Limited (SFPL), the company which owns Yoga Bar, will happen over a period of three to four years. 47.5 per cent stake in SFPL will be acquired in tranches by March 31, 2025. The balance stake will be acquired, based on predefined valuation criteria, subject to other conditions agreed to in the binding documents.
Reference Link:- https://www.businesstoday.in/markets/stocks/story/itc-stock-rises-160-in-3-years-market-cap-inches-closer-to-rs-5-lakh-crore-370464-2023-02-16