What should investors do with ITC post December quarter results? Brokerages see about 30% upside

Most global brokerage firms maintained their rating on the fast-moving consumer goods (FMCG) company ITC after it reported 15 per cent rise in the consolidated net profit at Rs 4,056 crore for the quarter ending December 31, 2021.

The company reported a consolidated net profit of Rs 3,526 crore in the year-ago period.
 

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The most aggressive target price of Rs 305 was put out by Jefferies post December quarter results that translates into an upside of about 30 per cent from Rs 235 recorded on 3 February.

The FMCG major with a market capitalization of nearly Rs 3 lakh cr reported a 12.7 per cent YoY rise in the standalone net profit at Rs 4,156.20 crore for the quarter ended December 31, 2021.

Revenue from operations grew 33.5 per cent to Rs 15862.3 crore against Rs 11879 crore posted last year. EBITDA stood at Rs 5102 crore, up 18.25 per cent from Rs 4314.7 crore posted last year.

However, margins declined to 32.2 per cent in Q3FY22 against 36.3 per cent posted in Q3FY21.  

We have collated a list of recommendations from various global brokerage firms according to a Zee Business TV report:

Jefferies: Buy| Target Rs 305

Jefferies maintained its buy rating on ITC post December quarter results but raised its 12-month target price to Rs 305 from Rs 300 earlier.

The global investment bank also raised EPS by 2-3%. Strong 3Q was led by beat in 4 out of 5 segments. Cigarette volume growth stood at c.12 per cent. FMCG revenue growth was better, but the impact of input price inflation showed in earnings.

CLSA: Buy| Target Rs 285

CLSA maintained its buy rating on ITC post December quarter results with a target price of Rs 285 that translates into an upside of over 21 per cent from Rs 235 recorded on 3 February.

ITC has seen a material top-line recovery. The FMCG business delivered 9.3 per cent top-line growth. “We continue to see a K-shaped trajectory for FMCG business,” said the note. Capital allocation concerns are progressively being addressed which is a positive sign.

UBS: Buy| Target Rs 280

UBS maintained its buy rating on ITC post December quarter results with a target price of Rs 280 that translates into an upside of over 19 per cent from 3 February.

The Q3FY22 Revenue beat was across segments. Cigarette volumes grew c.13 per cent YoY, and the overall revenue growth stood at 32.1 per cent YoY (2Y-CAGR: 15.8%).
 
FMCG non-cigarette segment revenues grew 9.3 per cent on a YoY basis (2Y-CAGR: 11.1%).
 
CITI: Neutral| Target Rs 245

Citigroup remains Neutral on ITC post Q3 with a target price of Rs 245. The FMCG major delivered a steady 3Q. Cigarette volumes may have now fully recovered to pre-Covid levels (+2% 2-year CAGR; est. +12-13% YoY) driven by improving mobility.
 
No change in taxation in FY23 Union Budget is sentiment positive, said the note.

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