ITC shares shine in falling market, hit 52-week high; brokerages bullish, see up to 18% upside

Shares of ITC outperformed in a falling market on Thursday on the back of strong earnings in the quarter ended March 31, 2022. In the early trade, shares of FMCG major surged nearly 5% (4.74%) to hit a 52-week high value of Rs 279.15 per share on the BSE. The surge in ITC shares holds significance as the market has been witnessing a tremendous sell-off, tracking weak global cues. Benchmarks Nifty50 and the Sensex corrected over 2% on Thursday.  

At 11.40 am, shares of leading tobacco manufacturer were trading higher by 2.5% to Rs 273.10 per share on the BSE. Despite high level of volatility, the FMCG counter has given a healthy return of over 30% in the past one year as on May 19.  

The surge in ITC shares comes after the tobacco and hotel major on Wednesday reported an 11.60 per cent rise in its consolidated net profit at Rs 4,259.68 crore for the fourth quarter ended in March 2022, driven by all-round growth across verticals. 

ITC, the biggest cigarettes & second largest FMCG company in India with ~78% of market share in cigarettes & presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products, had posted a net profit of Rs 3,816.84 crore during the January-March quarter of the previous fiscal, ITC said in a regulatory filing. 

Meanwhile, brokerages remain bullish on FMCG company and have mixed stance on the share. Here is what they say: 

Brokerage firm JM financial sees maximum upside of 17% in the counter. The brokerage sees potential for the stock to reverse the long period of lackluster performance as it delivered another quarter of strong, all-round beat in its earnings.  

It maintained a buy rating with a target price of Rs 315 on the FMCG major. It turns out to be an upside of nearly 18% on May 18 closing price.  

 ICICI Direct research upgraded ITC rating from hold to buy rating with a target price of Rs 310, which translates into an upside of 16% on Wednesday's closing price of Rs 267 per share on the BSE.  

It believes that cigarette volumes, price growth in FMCG business and strong agri exports would drive revenues for the company in future.  

Stating that the company delivered a solid performance with another quarter of robust growth in cigarette volumes (~9%) which surpassed pre-Covid levels and now seems on growth trajectory, Yes Securities maintained a buy rating with target price of Rs 308.  

""A steady 12% growth in FMCG business despite a high base with sequential improvement in margins, hotels business turning around and above expected growth in both the Agri (29% growth) and paperboards (32% growth) businesses on a high base. We reiterate our BUY rating," the brokerage said.  

Motilal Oswal remained with its neutral rating on ITC. In the ongoing environment where material cost inflation is a worry, ITC’s resilient Cigarette margins render relatively better near-term visibility v/s peers, it said.  

"Longer term re-rating though will depend on diversification from cigarettes (81% of FY22 EBIT) and whether sustained earnings growth returns to the late-teen levels seen in the first half of the last decade. We maintain our Neutral rating on the stock with a TP of INR265," the brokerage added.