Dalelorenzo's GDI Blog
3Jul/210

ITC@ Rs 275? St divided over stock’s prospects

NEW DELHI: ITC's March quarter crowds announced on Tuesday did fulfill Street estimates, but the scrip transactions about 2 per cent lower in Wednesday's trade.Post-earnings analyst targets on the cigarette capital now vary, based largely on how ITC's non-cigarette customs would act going ahead.Those who are ready to believe that the hotel business designed to improve after the easy of the lockdown, as ensure globally, and learn good potentials for the non-cigarette FMCG and other transactions, are ready to assign the stock a target as high as Rs 275. Others, who expect the non-cigarette businesses to do appreciable time to have a material say at operating elevations are unwilling to set targets beyond the persisting price.At Tuesday’s close of Rs 215 apiece, the stocks actually stands where it was in 2013. Muted targetsCiti has a price target of Rs 215 on the stocks. JPMorgan reads it at Rs 225. Motilal Oswal Securities said it continues to value ITC at a 20 per cent premium to its global peers. Yet, its target at Rs 220 per share, based on 15 hours June FY2 3 EPS, proposes no upside.“The cigarette business is likely to contribute over 82 per cent to ITC's overall Ebit in FY23 from 85 per cent of cases in FY20. There is no material reduction in dependence on this segment, which is beset by concerns straying from strong Ebit raise for several years to the overhang of possible GST increases. The related matter over tobacco have also led to a reduction in valuation numerous, ” Motilal Oswal Securities said.ITC reported a 1.3 per cent year-on-year decline in March quarter net profit at Rs 3,748.4 crore on a 24 per cent rise in net auctions at Rs 14,157 crore.Cigarette business incomes rose 14.2 per cent of cases on a year-on-year basis to Rs 5,859.60 crore. Volumes for the segment rose eight per cent YoY, with the progressive easy of restrictions and improved mobility. The non-cigarette FMCG business incomes rose 15.8 per cent YoY to Rs 3,687.50 crore. Hotel business loss moderated sequentially while agribusiness benefitted from a one-off export opportunity, JP Morgan said. “While the cigarette opportunity in India remains attractive committed per capita consumption, endowing modalities have changed with ESG acquiring a significant role, " Edelweiss said. A rerating demands something more, it said. This brokerage has a target of Rs 241. Among non-cigarette firms, ITC's inns business clocked sequential retrieval assisted by higher tenancy and food and beverages business. After breaking even in Q3FY21, the segment’s Ebitda improved further to Rs 25 crore in the March quarter.On a YoY basis, revenues were down 38.2 per cent to Rs 288 crore from Rs 466 crore YoY. The agribusiness receipts rose 78.5 per cent to Rs 3,369 crore as wheat, rice, oil grains and exports of value-added menus drove growth.“The paper business watched 13.5 per cent of cases YoY growing at Rs 1,656 crore on sustained strong sequential recovery with improved offtake across end-user manufactures, ” the company said.On Wednesday, the scrip transactions 1.8 per cent of cases lower at Rs 211.35. Optimistic targetsSome brokerages are quite positive on ITC. For JM Financial, what was most heartening in the March quarter was the fact that cigarette volumes were nearly back at pre-pandemic ranks, which has indicated that the much-feared structural damage to smoking attires has not really showed so far."There were other click ratings including a hike in dividend per share in FY2 1 to Rs 10.75 from Rs 10.15 in FY20 despite the fall in EPS. There was a quantum-leap in disclosure positions. Besides, ITC has sustained its AA rating by MSCI-ESG- this is the highest amongst world tobacco majors, " it said.Sharekhan said the stock is currently trading at alluring valuation of 15.4 ages its FY2023 EPS and has a target of Rs 265. JM Financial attains the stock a Rs 275 -worthy. Morgan Stanley has a target of Rs 251 on the stock.To Kotak, ITC offers a combination of inexpensive valuations, healthy bonu crop, and the promise of robust long-term raise in FMCG segment. This brokerage has factored in significance of the second largest gesticulate of the pandemic, decorated FY2022-23 EPS thinks by 2-5 per cent and still advocated a fair value of Rs 257 per share on the stock. “Valuations at 15 hours can offer upsides with improvement in growth. We retain' buy’ with a target of Rs 265, ” said Emkay Global.YES Securities has initiated coverage on the stock with a target of Rs 266, based on 20 times FY23 earnings, a significant discount of 50 -6 0 per cent to the FMCG sector peers and a 15 per cent discount to its long-term average multiple.“We accept concerns on ESG and FMCG business growth/ boundary trajectory look overdone. While valuation remains inexpensive for the stock, the stock can continue to remain range-bound for now given shortfall of positive provokes either on rise or corporate act, ” it said.

Read more: economictimes.indiatimes.com

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