ITC regains Rs 3-trillion market cap; stock hits 21-month high

ITC's market capitalisation returned to Rs 3 trillion-mark on Wednesday after the stock of the biggest cigarette and second largest fast moving consumer goods (FMCG) company hit a 21-month high on the bourses. The stock hit an intra-day high of Rs 244.70, up 1 per cent on the BSE today, and was trading at its highest level since December 2019.

In the past one week, ITC has outperformed the market by surging 13 per cent on expectations of an improvement in the company’s businesses. In comparison, the S&P BSE Sensex was up 0.62 per cent during the week. At 01:55 pm, ITC’s market cap stood at Rs 2.999 trillion on the BSE, exchange data shows.

Foreign brokerage houses are bullish on ITC as they believe the company’s cigarettes business will fully recover with the aggressive vaccination drive and reduction in Covid-19 cases. In April-June quarter, ITC's cigarettes volumes were impacted by the second wave (down 21 per cent on two-year basis). However, week‐on‐week improvement was seen since mid-June with most markets returning to normalcy and witnessing faster recovery compared with the first wave.

"ITC has 78 per cent market share in cigarettes and presence in staples, biscuits, noodles, snacks, chocolate, dairy and personal care products. Lower lockdown impact and the faster recovery trends seen in cigarettes are positives and improve earnings growth visibility. In addition to the rising profitability of FMCG, improvement in IT is notable, and can offer incremental upsides," said analysts at Emkay Global. They maintain a ‘buy’ rating on the stock with a target price of Rs 270.

Meanwhile, according to analysts at HDFC Securities, ITC is expected to take a price hike in cigarette in H2FY22. Other FMCG margin improvement continues, with an expected price hike, which would set off the raw material inflation.

As the number of Covid-19 cases started to reduce, mobility improved, restrictions were progressively lifted, stores remained open for a longer time, and modern trade (MT) reopened in a phased manner. The demand in July-August 2021 has been better than that in June’21.