Post Budget cheer: ITC jumps to 7-week high, gains 3.5% on heavy volumes

The stock had corrected 20 per cent from its 52-week high of Rs 265.30 touched on October 10, 2021, amid fears of higher taxes.

Shares of cigarette to fast moving consumer goods (FMCG) major ITC hit a seven-week high of Rs 228.80, up 4 per cent on the BSE in Tuesday’s intra-day trade on back of heavy volumes as no announcement with regards to hike in taxes were proposed in the Budget 2022.

The stock traded at its highest level since December 15, 2021.  The stock finally ended  3.5 per cent higher at Rs 227.70, as compared to 1.5 per cent rally in the S&P BSE Sensex. The counter witnessed huge trading volumes, with a combined 44.65 million equity shares changing hands on the NSE and BSE.

ITC hit a low of Rs 210 on December 20, 2021, and had corrected 20 per cent from its 52-week high level of Rs 265.30 touched on October 10, 2021, on concerns of taxation on cigarettes.

ITC in its analyst meet in December highlighted its growth initiatives across divisions and is hopeful of delivering double-digit growth ahead. It highlighted better recovery trends in cigarettes after the second Covid-19 wave, and has gained 100bps in market share. Commentary indicated improvement in mix, with stability in the tax regime and constant innovations, complemented by strong last-mile execution, analyst at Emkay Global Financial Services said.

ITC expects margin improvement to continue over the longer term and expects industry-leading margins across categories, led by manufacturing cost efficiencies, mix improvement and accretive acquisitions. High inflationary pressures are, however, likely to impact the margin trajectory in the near term, the brokerage firm said.

“Strategy refresh, stable taxation for cigarette business, tailwinds for FMCG business, use of data analytics, widening distribution, and cost optimization via supply chain interventions and smart manufacturing are key positives. Company has ruled out any potential for demerger except hotels and share buy-back. Reasonable valuations make the stock more attractive,” analyst at Centrum Capital said in December report.

The brokerage firm firmly believes that ITC is far below its fair value and will significantly outperform its peers. It expects operating scale to lift foods revenue and profitability in the near term.

Meanwhile, the board of directors of ITC is scheduled to meet on Thursday, 3rd February, 2022, to consider and approve the financial results of the Company for the quarter and nine months ended 31st December, 2021. The board will also consider declaration of interim dividend for the financial year ending on 31st March, 2022.

Besides ITC, shares of Godfrey Philips India too gained 4 per cent to Rs 1,160 on the BSE in intra-day trade.