ITC shares at 16-month low, HSBC cuts price target after Q1 cigarette volume misses estimates

Shares of ITC fell 2.6 percent intraday to hit 16-month low on August 5 after company's total revenue, cigarette volume growth and FMCG business in quarter 1 didn't meet expectations.

The stock has plunged 15 percent in the last three-month to Rs 257.60, the lowest level since March 30, 2018. It was quoting at Rs 260.15, down Rs 4.45, or 1.68 percent, on the BSE at 1306 hours.

In Q1, profit grew by 12.6 percent year-on-year to Rs 3,173.9 crore, which was in line with analyst estimates, and revenue increased by 5.8 percent to Rs 11,502.8 crore, lower than analysts' expectations of Rs 11,565 crore.

Cigarette business, which contributed 47 percent to total revenue, showed a 6 percent YoY growth in revenue and its volume grew by 3-4 percent, far below estimates of around 5 percent. FMCG revenue growth of 6.6 percent was also below estimates of 8-10 percent for the quarter YoY.

While having overweight call on ITC with a target price at Rs 360, Morgan Stanley said Q1 results were weaker than it expected. "Except for FMCG, EBIT growth across all business segments missed our estimate," it added.

Performance in cigarette business was affected by weakness in overall environment, ITC said.

HSBC also said Q1 cigarette volume growth was slightly below its expectations. While valuation undemanding, taxation path remains a key risk, it added.

The global brokerage house maintained its buy call on the stock, but slashed price target to Rs 320 from Rs 330 per share.

CLSA also remained buyer on the stock with a target price at Rs 365 per share as the stock provided attractive risk-reward.

"Double-digit growth remained elusive for company's company's cigarette business which grew 8 percent in Q1. FMCG business reported strong EBITDA growth despite moderate topline show," the brokerage said.