Shares of ITC hit an over two-year high of Rs 279.15, surging 5 per cent on the BSE in a weak market, after the company reported strong results with around 9 per cent cigarette volume growth in March quarter (Q4FY22). The board has also recommended a final dividend of Rs 6.25 per share.
The stock of the cigarettes-to-hotels major hit its highest level since July 2019, when it hit a high of Rs 282.95. At 09:44 AM; ITC was up 3.8 per cent at Rs 276.50 as compared to 2 per cent decline in the S&P BSE Sensex. The counter saw huge trading volumes with a combined 28.5 million equity shares having changed hands on the NSE and BSE.
For March quarter of FY22 (Q4FY22), ITC reported an 11.60 per cent year-on-year (YoY) increase in consolidated profit after tax (PAT) at Rs 4,260 crore led by growth across segments. In the year-ago period, PAT was at Rs 3,817 crore. The company’s consolidated revenues were Rs 17,754 crore, up 15.25 per cent from Rs 15,404 crore in the year-ago period.
The company attributed its performance to “strong” growth across all segments. Cigarettes staged a broad-based recovery with volumes surpassing pre-pandemic levels, the company said.
The company further said that the non-cigarettes FMCG business, despite unprecedented increase in prices of key inputs, performed well through focused cost management interventions across the value chain, premiumisation, product mix enrichment and judicious pricing actions. In addition, re-opening of educational institutions helped in the recovery of the education & stationery productions business, though it was still below pre-pandemic levels.
“In the ongoing environment, where material cost inflation is a worry, ITC’s resilient Cigarette margins render relatively better near-term visibility v/s peers. Longer term re-rating though will depend on diversification from cigarettes (81 per cent of FY22 EBIT) and whether sustained earnings growth returns to the late-teen levels seen in the first half of the last decade,” Motilal Oswal Financial Services said in a post result report.
Those at ICICI Securities, meanwhile, said: ITC’s share price has underperformed the FMCG index with negative 6.8 per cent return (from Rs 286 in May 2017 to Rs 267 in May 2022). We expect cigarette volumes, price growth in FMCG business & strong agri exports to drive revenues for the company in future.
Stable taxation on cigarettes is expected to drive volumes, going forward. Moreover, the company has been gaining market share in cigarettes from last one year through new premium products & aggrieve trade promotions, the brokerage firm added.
The company’s FMCG business growing at a sustained pace with continues improvement in margins in the last five years. Opportunity size of existing foods portfolio is large. Given agri commodities constitutes larger part of raw material, input cost pressures is relatively less for the company. The company is utilizing export opportunity in wheat, rice & tobacco in last one year. Recent spurt in global agri prices is likely to aid growth, ICICI Securities said. The brokerage firmhas upgraded rating on ITC from ‘hold’ to ‘buy’ with a target price of Rs 310 per share.
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