ITC shares buck negative trend, stock jumps 7% in 5 sessions – brokerage sees upside of 11%

The fast-moving consumer goods (FMCG) major ITC shares have bucked the negative market sentiment to rise for the fifth straight session on Friday, up 7 per cent as compared to around 2 per cent fall in the benchmark indices during the same period. 

The counter on Friday gained almost 4 per cent to touch a day’s high level of Rs 227.4 per share on the BSE intraday in otherwise weak market. At around 02:34 pm, the scrip was up over 3.5 per cent to Rs 227.15 per share on the BSE, as against 0.59 per cent fall in the S&P BSE Sensex. 

Shares of ITC in the last one month has gained 4 per cent, as compared to a 3 per cent fall in the BSE Sensex. While it has marginally grew by 0.09 per cent versus 6 per cent slump in the benchmark index in the last three months. 

The stock had hit a 52-week high of Rs 265.30 per share on October 18, 2021 and a 52-week low of Rs 199 per share on May 4, 2021. 

In December-end quarter of FY22, the company reported overall strong numbers, wherein revenue growth was led by robust recovery across markets due to improvement in supply chain.  

The company is one of the leaders in cigarettes manufacturing and distribution, recorded a recovery with revenues at Rs 6,959 crore, as against Rs 6,091 crore year-on-year (YoY). Similarly, profits from the segment stood at Rs 4,187 crore in Q3FY22 as against Rs 3,659 crore in the year-ago period. 

Global brokerage firm Morgan Stanley in its result update had said it’s positive on the company’s outlook despite ongoing structural headwinds (especially from ESG and less tobacco consumption). It sets price target of Rs 251 per share, an upside of around 11 per cent from market price. 

It cites three reasons for risks to upside they are: Benign tax environment for tobacco; successful launch of differentiated products in the FMCG business and better-than-expected margin improvement, and states valuation remains reasonably attractive, even adjusting for ESG.