ITC's better Q4 fails to fully convince the street; stock rises just 1%

While high hopes from non-cigarette FMCG, higher dividend payout and strong free cash flows are positive, multiple headwinds for key cigarette business

Besides ITC’s better-than-expected March 2020 quarter (Q4) earnings, high hopes from its non-cigarette FMCG business (staple category like Aashirvaad atta, Sunfeast brand, etc.) and higher dividend pay-out (80 per cent versus 68-69 per cent earlier) failed to encourage the street to a great extent. Therefore, despite very attractive valuations, ITC’s stock rose by just one per cent on Monday, although it was better than 0.6 per cent fall in the BSE Sensex. This was mainly for dominance of cigarette business, which is exposed to tax, regulatory and other headwinds.

The cigarette major, which announced its Q4 results on Friday last