Stock of the year: ITC shares zoom around 60% in 2022 so far, highest among Nifty firms– analysts see more upside potential

Stock of the year: The fast-moving consumer goods (FMCG)-to-cigarettes manufacturing company – ITC has turned out to be a stock of the year 2022 among heavyweights. The counter zoomed 58 per cent year-to-date (YTD) as of December 13, 2022, despite massive volatility in the domestic markets during the year.

In comparison, the benchmark indices – Nifty50 and BSE Sensex – each surged marginally by over 5.5 per cent YTD as of today. While the broader markets such as Mid and Small-cap gained by around 3 per cent and flattish growth, respectively in 2022.

"ITC is the stock of the year as it started performing even when the market was not doing well and all the stocks went for a major correction", Rahul Sharma, Research Head, Equity 99 said, adding that the company not only performed well on share market but also put a good show in terms of quarterly results.

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All the businesses of the company such as FMCG, agriculture, hotel, and tobacco have done excellent, the analyst also noted and added the peers didn’t do well mainly due to inflation, eventually becoming a company and stock for the year 2022.

Other stocks like Adani Enterprise, Coal India, Reliance Industries, and Hindustan Unilever, among others from heavyweights excelled, Sharma said. Sector-wise, public-sector companies have performed well as huge value unlocking in the sector was seen, besides, railways and defense sectors too did well.

“A stable tax environment for Cigarettes in recent years has allowed ITC to calibrate price increases to avoid a disruption in demand. We expect this trend to continue, which should result in improved Cigarette volumes and earnings visibility, going ahead,” Gautam Duggad of Motilal Oswal said.

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The analyst maintained a Buy call on the stock with a target of Rs 400 per share, implying around 16 per cent upside, and believes there is further scope for upside on a healthy earnings outlook.

While near term outlook is strong, the brokerage expects a slowdown in growth post FY23 given the high base of the current year, however, expect incremental returns to accrue in a more calibrated manner, Amnish Aggarwal, Research Analyst at Prabhudas Lilladher said on the company.

The analyst maintains an Accumulate rating with a target price of Rs 365 per share, implying around a 6 per cent upside in the stock.

Similarly, Jaykumar Doshi, Research Analyst, Kotak Institutional Equities said, we raise FY2023-24 EPS estimates by 6 per cent, while maintaining Add rating with a target of Rs 380 per share, implying over 8 per cent upside in the stock.

“In our view, further re-rating warrants an acceleration in cigarettes EBIT growth to high-single-digit CAGR from mid-single digit CAGR at present, which in turn hinges on a stable tax regime for a foreseeable future and clamp-down of illicit trade by enforcement agencies,” the analyst said.