ITC gains 4% to hit 52-week high; stocks surges 24% in 6 weeks

For Q4FY22, Motilal Oswal Financial Services expects ITC to post a 4 per cent growth in Cigarette business volumes with a 4.1 per cent/12.4 per cent YoY increase in sales/EBITDA

Shares of ITC hit a fresh 52-week high of Rs 265.90, up 4 per cent on the BSE in Friday's intra-day trade, on expectation of healthy earnings. They surpassed their previous high of Rs 265.30, touched on October 18, 2021.

The stock of the cigarettes to fast moving consumer goods (FMCG) major has rallied 24 per cent in the past six weeks. Moreover, it had hit a record high of Rs 353 on July 3, 2017.

ITC is the biggest cigarettes and the second largest FMCG company in India with around 78 per cent market share in cigarettes and presence in staples, biscuits, noodles, snacks, chocolate, dairy products and personal care products. The company is also present in paperboard, printing and packaging business with revenues of Rs 4,549 crore, and agri business with Rs 8,001 crore.

For the October-December quarter (Q3FY22), ITC had reported strong all-around revenue performance led by robust recovery across markets due to rise in mobility and efficient distribution system. The company's cigarettes business, which was one of the worst impacted businesses in last two years due to Covid-19 disruptions, reported robust recovery in Q3.

The company's paperboard reported record volumes and robust performance was aided by demand revival across most end-user segments, exports and higher realizations. That apart, the easing of travel restrictions, pickup in leisure travel and onset of the festive/wedding season boosted average room revenue (ARR) and Occupancy levels for hotel business.

Given this, brokerage firm Sharekhan had raised earnings estimates upwards for FY2022/23/24 to factor in the strong performance in Q3FY22.

"We believe stable taxation on cigarettes would result in high growth in cigarette volumes in the medium term. Further, we believe FMCG business margin uptick trajectory would continue (after the elevated commodity prices normalise). We are positive on FMCG growth and margins expansion possibility & the company’s better capital allocation policy (higher dividend pay-out and no more capex on hotels business)," ICICI Securities had said in Q3 results update.

Meanwhile, according to Motilal Oswal Financial Services, ITC is expected to post a 4 per cent growth in Cigarette volumes for January-March quarter (Q4FY22, )with a 4.1 per cent/12.4 per cent year-on-year (YoY) increase in sales/EBITDA. "While its FMCG-Others business is likely to face severe input cost pressures, ITC is relatively insulated, given the pricing power in its Cigarettes business," the brokerage firm said in Q4FY22 results preview report.