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From Goldman Sachs to CLSA, brokerages upbeat on this stock; details here

At 9:17 AM, ITC shares were trading nearly 0.50 per cent lower at Rs 439.45 per share. In comparison, S&P BSE Sensex was down 0.14 per cent at 75,309.65 levels

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Tanmay Tiwary New Delhi

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Despite a subdued performance in the March quarter (Q4FY24), brokerages remain optimistic about the long-term growth prospects of ITC

Domestic brokerage Emkay Global highlighted the company’s positive execution and macro support, though near-term challenges are anticipated, including inflationary stress in cigarettes and a muted outlook for agri and paper businesses.

Emkay said, “Factoring in the stress in cigarette margin, we trim our sum-of-the-parts (SoTP) based  target price to Rs 510 per share.” Nuvama Institutional Equities retained its ‘Buy’ call as the numbers largely met its estimates.

Analysts noted that cigarette net revenue/volumes grew 7 per cent/2 per cent Y-o-Y, ahead of estimates aided by improved mix, pricing, and prudent cost management. 

Nuvama also cautioned that the cigarette volumes shall remain range bound in low-to-mid-single digit for FY25/26E on the back of subdued demand conditions in overall consumption space. 

“All in all, we are marginally cutting FY25E/26E earnings per share (EPS) by 3 per cent/2 per cent, yielding a revised SoTP based TP of Rs 505. Retain Buy,” Nuvama said in a note. Those at ICICI Securities also highlighted the positive trend in cigarette volume growth during Q4FY24, surpassing their estimates and rebounding from a decline in the previous quarter. 

Despite subdued demand conditions, the FMCG sector exhibited resilience, boasting a 7 per cent Y-o-Y growth and sustained profitability driven by operational efficiencies and pricing strategies.

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Analysts highlighted the favourable regulatory environment for the formal cigarettes industry, citing stable taxes and enforcement actions as supportive factors for future volume growth. 

However, they cautioned against margin constraints due to inflationary pressures in key inputs and challenges in the agri and paper sectors. Considering these factors, ICICI Securities maintained ‘add’ with a revised target price of Rs 480.

International brokerages also continue to remain optimistic regarding ITC’s growth prospects.

According to reports, Morgan Stanley maintained an ‘Overweight’ rating with a target price of Rs 506 per share, while Citi maintained its ‘buy’ recommendation and raised the target price to Rs 515 per share.

CLSA remained positive with an ‘Outperform’ rating and a target price of Rs 470 per share. 

Meanwhile, Goldman Sachs maintained a ‘buy’ stance with a target price of Rs 480 per share. 

Jefferies, however, maintained a ‘hold’ recommendation with a target price of Rs 435 per share. 

 
Q4 financial performance

Overall, ITC's performance in the March quarter (Q4FY24) was subdued, with a 4 per cent Y-o-Y decline in profit to Rs 5,120.5 crore, from Rs 5,335.2 crore in Q4FY23. 

Sequentially, net profit decreased 1.1 per cent from Rs 5,175.5 crore in Q3FY24. 

Revenue for the quarter fell marginally (0.2 per cent) on a year-on-year basis to Rs 19,446.5 crore, but sequentially rose 2 per cent from Rs 19,058.3 crore. 

Despite the challenges, the company’s board recommended a final dividend of Rs 7.50 per ordinary share for the financial year ending March 31, 2024. 

The final dividend, if declared, will be paid between July 29-31, 2024. ITC shares fell as much as 1.35 per cent to hit an intraday low of Rs 435.20 per share on Friday. 

Meanwhile, the stock settled 1.16 per cent lower at Rs 436.10 per share. By comparison, S&P BSE Sensex fell 0.01 per cent to 75,410.39 levels.

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First Published: May 24 2024 | 9:25 AM IST

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