ITC Hits 5th Day of Record Highs, Share Soars 32% So Far in 2023

ITC shares hit a new 52-week high, posting a fifth straight session of gains.

Shares of ITC hit a new high of Rs 440 in intraday trade on Thursday, up 1.5% on the BSE. Shares of the largest cigarette and second-largest fast-moving consumer goods (FMCG) company were higher for the fifth day in a row, gaining 5% in the period. In contrast, the S&P BSE Sensex was down 0.08% at 61,726 at 9:44 am.

ITC has outperformed the market so far in 2023, surging 32%, while the benchmark rose 0.73% on strong earnings.

ITC posted strong results in the January-March quarter (Q4), with strong growth in the FMCG sector and good performance in the hotel sector. The tobacco unit’s performance was in line with expectations, with double-digit growth in volumes, helped by regaining market share from the smuggling trade. Non-cigarette earnings before interest and taxes (Ebit) rose 60%, despite a relatively weaker performance in paperboard.

ITC reported a 6.1% rise in sales to Rs 17,220 crore, Ebitda rose 18.9% to Rs 6,210 crore and adjusted profit after tax (PAT) rose 20.1% to Rs 5,030 crore.

The FMCG business has a four-year sales CAGR of 11.2%, faster than many other FMCG companies. The brokerage sees a strong opportunity size and potential for high-margin expansion in the food portfolio. The company intends to improve margins by 100-150 basis points per year.

Hotel business occupancy has remained above 70% and ARR is above pre-pandemic levels. We believe the company will be able to maintain strong growth in the hotel business in the medium term, which is a key trigger for future price performance. The brokerage maintained its “buy” call on the stock with a target price of Rs 500 per share.

BNP Paribas maintained its Buy rating with a SoTP-based target price of Rs 480.

Meanwhile, the ITC board has recommended a final dividend of Rs 6.75 per share and a special dividend of Rs 2.75 per share for the financial year ending March 31, 2023. The company has set Tuesday, May 30, 2023, as the record date for the payment of dividends by entitlement members.

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