ITC share price gains after Q1 results; Should buy, sell or hold? Here’s what brokerages recommend

ITC reported a 17.6% year-on-year (YoY) rise in its standalone net profit for Q1FY24 to ₹4,902.74 crore.

The company’s revenue during the quarter ended June 2023 declined 7.2% to ₹16,995.49 crore from ₹18,320.16 crore, YoY.

ITC’s cigarette business clocked nearly 13% YoY revenue growth at ₹7,465.27 crore on the back of healthy cigarette volume growth of 8% in Q1FY24, while its operating profit rose 11% on year to ₹4,656 crore.

Read here: ITC Q1 Results: Net profit rises 17.6% on year to ₹4,902.74 crore

ITC board of directors also approved the demerger of its Hotels business under a scheme of arrangement amongst ITC Ltd and ITC Hotels Ltd. According to the share entitlement ratio fixed by the company, for every 10 shares held in ITC, ITC shareholders will get 1 share of ITC Hotel.

Here’s what brokerages said on ITC shares and ITC Q1 results:

Nuvama Institutional Equities

ITC’s Q1FY24 revenue came below the brokerage firm’s forecast; however, EBITDA was in line while net profit beat the estimates. 

Cigarettes volume shot up 8% YoY, implying market share gains from illegal players — with ITC leading the pack. The FMCG – Others segment grew 16.1% YoY, primarily driven by robust growth in staples, biscuits, noodles, dairy, agarbatti, premium soaps, etc. The Hotels segment clocked its best-ever Q1, it noted. 

“We remain positive on ITC’s FY24E revenue momentum with major segments doing well,” Nuvama Institutional Equities said.

It retained a ‘Buy’ rating on the stock with an SoTP-based target price of ₹560 per share.

Read here: ITC hotel spinoff at 10:1 ratio, IPO in 15 months

Motilal Oswal Financial Services

At a time when uncertainty looms over the industry, led by high inflation, unpredictable monsoons and continued weak rural sales, ITC’s recovery in Cigarette volumes offer decent earnings visibility at reasonable valuations and attractive dividend yield, Motilal Oswal Financial Services said.

The brokerage maintained its ‘Buy’ rating on ITC with a target price of ₹535 per share, based on 28x FY25E EPS.

Antique Stock Broking

ITC’s operational performance was strong on the back of 13% growth in cigarettes and 16% growth in FMCG business. Cigarette volume and EBIT grew 9% and 11%, driven by a market share gain, superior mix, and strict action taken by the government to curb illicit trade, said Antique Stock Broking.

“We remain positive on ITC on sustained momentum in cigarettes, improving the performance of FMCG, and other businesses,” the brokerage house added.

It maintained a ‘Buy’ recommendation with a SoTP-based target price of ₹500.

Also Read: Dividend stock: LIC to get over ₹1,800 crore as ITC begins dividend payment to shareholders

JM Financial said that ITC’s June quarter earnings did not carry the same kind of excitement that was visible in the past few quarters’ results. The FMCG segment, however, continued to perform extremely well – growth was sector-leading with strong-enough margin improvement to help EBIT in the segment to more than double. 

“The stock could take a breather in the near-term on the back of this result, though a potential re-rating is likely on the cards given a sharper capital-allocation strategy,” JM Financial said.

The brokerage has a ‘Buy’ call on ITC and cut the target price to ₹555 per share.

At 9:30 am, ITC share price was trading 1.45% higher at ₹455.45 apiece on the BSE.

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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.

Updated: 16 Aug 2023, 09:32 AM IST