ITC shares decline 1% post investors' meet; what should you do with this counter?

Shares of ITC declined one percent on the BSE intraday trade on Wednesday, a day after the company held first-ever investors and analysts meet on Tuesday. The development comes after ITC Limited’s Analysts and Investors Meet 2021 turned out to be a non-event as no major announcement was made.

At around 11.25 am, shares of ITC traded lower by Rs 2.40 or 1.05% to Rs 225.90 per share on the BSE. 

Since the company is open to the idea of demerger, we are more bullish on this FMCG share, said Vinod Nair, Head of Research at Geojit Financial Services.

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"We have got more positives on the company, post the meet. The major expectation was on the possibility of demerger, and the company is open to the idea. Though it may take time, we may see separate three entities of FMCG, IT and Hotel as the industry recovers, in the future. Ongoing strategy focus will be on M&A, Exports and proximal markets, " he said.  

Talking about the company's future plans, Nair said it is actively pursuing acquisition opportunities in FMCG and IT businesses and has lined up an investment of Rs 10,000 crore over the next three years (35-40% in FMCG, including cigarettes, 25-30% in Paper boards, 10% in Hotel business). Considering the long-term plans and rich cash position, the company is a decent value investment," he said.  

Earlier, global brokerages maintained their stance on ITC post analysts meet and gave up to 30% upside.  

Jefferies gave the most aggressive target price of Rs 300, which translates into an upside of over 30 per cent return from Rs 228 recorded on December 14. Similarly, Morgan Stanley maintained its overweight rating on ITC with a target price of Rs 251. The management highlighted that it remains focused on creating sustained shareholder value and is evaluating multiple options. The company remains committed to restructuring the hotels business.

CLSA maintained its buy rating on ITC with a 12-month target price of Rs 275. In the FMCG business, the FMCG major is looking to leverage its power brand and drive margin expansion. For the cigarettes business, ITC said that a stable tax regime is positive for the sector. The management also highlighted that it is now open for an alternate structure in its hotels, and infotech business. FMCG value unlocking remains a focus.

On the other hand, JPMorgan maintained its neutral rating on ITC with a target price of Rs 238. There is aggression on the FMCG business from the management. The global investment bank value ITC at 17x FY23E P/E (ex FMCG 13x). “We believe that the upcoming budget session will be keenly watched from ITC point of view,” said the note.

UBS maintained its buy rating on ITC post the analysts meet with a target price of Rs 280. According to the management, the cigarette volume is likely to grow. There are signs of improvement in the FMCG business.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)