After posting better than expected Q4FY19 result, investors were gung-ho about FMCG-major ITC. The company soared by nearly 3% on Tuesday’s trading session, after clocking an intraday high of Rs 297.70 per piece. However, ITC stock finished at Rs 294 up by 1.43% on the same index. ITC recorded growth of 18.72% yoy in Q4FY19 net profit to Rs 3,481.9 crore. ITC's revenue from operations increased by 12.88% on yearly basis, with cigarette business recording jump of 11.13% with revenue of Rs 5,485.92 crore in Q4FY19. Importantly, a buy rating has been raised on ITC. 

Here’s what experts have said:

Edelweiss Securities:

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Abneesh Roy and Alok Shah analysts here said, “ Optically, though growth in the FMCG business was soft, adjusting for restructuring in lifestyle retailing business and pipeline calibration in education & stationery business, the segment grew 10% YoY. With volume revival in cigarette business coupled with market share gains and margin expansion in FMCG business, we retain ‘BUY’.”

The duo added, “The cigarette opportunity in India remains attractive with per capita consumption at 1/18th China’s. Compared to global peers, where staples trade at a premium of ~35% to cigarette companies, the premium in India is ~75%, which should narrow. Hence, we maintain ‘BUY/SP’ with TP of INR340. At CMP, the stock trades at 22.4x FY21E EPS.”

Kotak Institutional Equities:

Rohit Chordia, Jaykumar Doshi and Aniket Sethi analysts here said, “In a deteriorating fiscal backdrop, greater focus on the risk of another punitive tax hike is understandable. 4QFY19 earnings delivery, healthy in our view, may not matter much to that extent. We continue to believe the sector would be a microcosm of the broader market in the short term – increasing interest in fewer and fewer stocks; ITC may not be in the list, increasingly favorable risk-reward notwithstanding. ADD stays; fair value: Rs335 (from 325).”

IIFL:

Percy Panthaki, Avi Mehta  and Sameer Gupta, Research Analysts at IIFL said, “With inflation, due to both these items, gradually moderating going forward, we expect Ebit growth to accelerate to 12%. There has been a slight acceleration in the Ebit growth trajectory in the current quarter as well. We find the stock reaction to the results (down 3%) surprising, and view it as a buying opportunity.”

Hence, the trio added, “We upgrade our EPS estimates by 4%/3% for FY20/21, to factor in the 4Q beat. Maintain our BUY rating, with a TP of Rs350.”

Sharekhan:

“We have broadly maintained our earnings estimates for FY2020 and FY2021 and we expect revenues and earnings to clock a CAGR of 12% each over FY2019-21. the company’s focus on become a diversified play by investing higher in businesses such as the Non-cigarette FMCG and Hotel augurs well for the company in long run,” said Sharekhan.

On stock price, the broking firm added, “ ITC is currently trading at 23x its FY2021E earnings, at a stark discount to some of the large FMCG stocks. In view of its steady performance in the core cigarette business and discounted valuations we maintain our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 347.”

ITC becomes multibagger, as overall gains in stock price are seen over 19% in near term.