ITC m-cap hits Rs 5-trn for the first time; stock surges 21% so far in CY23

ITC has joined the elite group of companies that have market capitalisation (market cap) of Rs 5-trillion. On Thursday, shares of the cigarette-to-hotel major touched a record high of Rs 402.60, up 1 per cent on the BSE in the intra-day trade. The company's market cap touched crossed Rs 5-trillion-mark for the first time on the bourses.

With a market cap of Rs 5.003 trillion, ITC stood at eighth positions in the overall market cap ranking, according to the data from BSE. In comparison, the S&P BSE Sensex was up 0.37 per cent at 59,790.16 at 09:28 AM.

Thus far in calendar year 2023 (CY23), ITC has outperformed the market by surging 21 per cent, as compared to 2.2 per cent decline in the S&P BSE Sensex.

ITC is one of the largest diversified players in India, present in businesses such as cigarettes, fast moving consumer goods (FMCG), hotels, and paper.

ITC has delivered resilient performance in the past few quarters, despite an uncertain demand environment and sustained inflationary pressures on margins. The resilient performance was driven by good recovery in its core cigarette business (in the post Covid era), steady double-digit growth in the non-cigarette FMCG business, and accelerated growth in the hotel, and paperboard, paper and packaging (PPP) business.

Foreign portfolio investors (FPIs), too, have increased their stake in ITC for a third straight quarter. In the March 2023 quarter, their holding in ITC increased to 12.87 per cent from 12.51 per cent, recorded at the end of December 2022 quarter. They held 12.25 per cent stake in September 2022 quarter, the shareholding pattern data shows.

According to Sharekhan, ITC is expected to maintain its volume growth momentum in the cigarette business, given no price hikes in the near-term, and government curbing illicit cigarette sales. Strong growth in the non-cigarette FMCG business, stellar recovery in the hotel business, and sustained growth in the PPP business will drive double-digit revenue and profit after tax (PAT) growth over the next two years.

"Strong earnings visibility with improving growth prospects of the core cigarette business and margin expansion in the non-cigarette FMCG business, along with a high cash-generation ability and strong dividend payout, will consistently improve valuations in the coming years," the brokerage firm said. It maintains its Buy recommendation on the stock with an unchanged price target of Rs 450.

ITC is focusing on de-risking its business model by reducing dependence on its core cigarette business (affected by regulatory and tax hurdles for the past few years) by scaling up the fast-growing consumer goods, PPP, and hotel businesses. The company has quickly rebound from disruption caused by the lockdown and key businesses are operating at normal levels. The company posted resilient performance in FY2022 with double-digit revenue and PAT growth.

Moreover, analysts at ICICI Securities expect ITC's FMCG business to see strong growth of 19.1 per cent led by higher growth in foods, discretionary & stationary segment in Q4FY23.

"Cigarette volumes would continue to grow at faster pace (10-13 per cent) led by stable taxation in last five years & curb on illicit cigarettes. Hotels segment is estimated to grow 77.8 per cent led by post-Covid pent up demand. The growth in paperboard segment is expected to moderate given raw material prices have declined & companies are taking price cuts accordingly," the brokerage firm said in its January-March quarter (Q4FY23) result preview.