ITC share price rises 1% as most analysts give a thumbs up to its prospects. The target prices indicate upto 16% gains.
ITC Ltd share price gained more than 1% during intraday trades on Thursday. The analysts have maintained positive view on growth prospects post the recent analysts/investors meet and say that moves by ITC are in the right direction for building sustainable growth.
Non-cigarette business remains a key driver for ITC. The ITC management emphasized a strategy to analysts which identified several growth drivers in the noncigarette segment. This segment has seen a 2.5 times rise in revenue and 3.2 times increase in bottom line in the past decade, as per analysts. ITC employs a three-fold growth framework as per analysts at Elara Securities. It is reinforcing core businesses, developing emerging ventures, such as beverages, frozen foods, liquid wash, nicotine, and value-added Agri, and it is exploring potential growth avenues, including premium skincare and food tech sais Elara analysts.
The major positive for the operations has been an increase in ROCE (Return on Capital Employed) of the non-cigarettes business to 21.7% in FY23 from 14.3% in FY13 highlighted Elara analysts.
Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt. Ltd, said that he remains positive innovation and digitization led strategy with sustained growth and 100% jump in ROCE of non-cigarette businesses and overall Rs94700 Crore cash generation in last 10 years.
The support to ITC earnings is likely to be provided by FMCG business that are also likely to see strong growth. In the foods segment, management has highlighted analysts that it expects significant growth runway, led by non-branded (82% of category) to branded conversion, penetrating emerging markets, building newer avenues, such as Yoga Bar and Sunrise acquisition, building future-led portfolio, such as plant based protein and millets to cater to the affluent India and leveraging its agri sourcing for cost competitiveness. Elara Analysts highlighted that ITC aims to expand EBITDA margin by 80-100bp pa through improved product mix and premiumization by ~30 basis points, scale advantages of ~20bp, and cost optimization of ~30bp.
ITC’s other FMCG business’ EBIDTA margins improved by 770 bps over FY2017-23 (stood at 10.2% in FY2023)
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For the Cigarette business too focus on clawing back market share in cigarettes from illicit trade in the cigarettes business, management remains committed to its strategy of a tier-wise product portfolio, innovative distinct offerings, and effective last-mile execution, said analysts at Elara Securities.
ITC’s stock has doubled since its last analyst meet in Dec 2021. Analysts at BNP Paribas said that they expect its outperformance in consumer coverage to continue. ITC management highlighted that stable taxation on cigarettes has positively impacted the tax revenue of government and the legal cigarette industry’s volumes. Though ITC earnings trajectory has been similar to that of Hindustan Unilever Ltd and Nestle in the past two decades, the still elevated gap in valuations and dividend yields make ITC our preferred FMCG pick, said analysts at BNP PAribas. Their target price for ITC at ₹535 indicates upside of 16.3% for the ITC Stock.
The analysts at Sharekhan too echoed a similar view in valuations. ITC stocks as per Sharekhan continues to trade at attractive valuation of 23x/20x its FY2025 and FY26 estimated earnings: The company has carved its growth plan very well by focusing on growing the core businesses, building-up the emerging business and investing in new vectors in the coming years that will be supported by prudent capital investment funded by higher cashflow. This will help earnings grow in double digits in the coming years. Stock, said analysts at Sharekhan. Their target price of ₹515 for the stock indicates almost 12% upside.
Even target price of Elara Securities at ₹516 for ITC indicates similar upside, while target price of Parbhudas Lilladher at ₹492 indicates an upside of more than 6% for the stock trading at close to ₹460 levels.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Published: 14 Dec 2023, 04:41 PM IST
