ITC shares up 54% this year. Should you still add?

“We forecast 19% yoy growth in Cigarette EBIT (+3.5% growth on 3-yr CAGR basis versus +2.9% in 1QFY23). In the FMCG segment (standalone), we estimate 12% yoy revenue growth implying 11.2% growth on 3-year CAGR basis; healthy double-digit growth would be led by recovery in stationery business and price increases," the note stated.

The brokerage models 50 bps qoq increase in FMCG EBIT margin to 5.1% off a low base and expects strong recovery in Hotels and continued strength in Paperboards. Kotak Securities has Add rating on ITC shares with a target price of ₹337 apiece. The FMCG stock is up about 54% in 2022 (YTD) so far. The brokerage expects ITC to deliver better print versus its beginning-of-the-quarter expectations.

ITC reported a healthy performance across segments despite a challenging operating environment driven by COVID-19 induced uncertainty and volatility as well as due to historically high inflationary headwinds, geopolitical tensions, and supply chain disruptions which led to high ocean freight.

With a stable taxation regime, domestic brokerage and research firm Axis Securities in a note on September 29 said that it believes ITC is poised to deliver encouraging performance moving forward. It also remains positive on the recovery in the cigarette segment (back to pre-COVID level on an exit basis),as well as on the structural uptick in the FMCG revenue/margin and recovery in the Hotels and Paper & Paperboard divisions.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.