ITC gains 2% in weak market, stock nears 52-week high

ITC shares gained 2% to Rs 279 on BSE during Friday’s intraday trading in an otherwise weak market, as good defensive play in a volatile environment. The diversified fast-moving consumer goods (FMCG) company’s stock quoted near its 52-week high of Rs 282.30 touched on May 20, 2022. In comparison, the S&P BSE Sensex was down 1% at 52,470 at 10:46 a.m. .

Over the past three months, ITC has outperformed the market by gaining 10% against a 12% decline in Sensex. In addition, in six months, the stock rose 28% against a 10% decline in the benchmark.

Besides having a virtual monopoly in its traditional cigarette business, ITC is also India’s leading retailer of FMCG, an undisputed market leader in the Indian carton and packaging industry, a global pioneer recognized in empowering farmers through its large-scale agribusiness, a prominent pre-hotelier in India with a chain of luxury hotels and a specialist global provider of digital solutions through its wholly owned subsidiary, ITC Infotech.

For the January to March 2022 quarter (Q4FY22), ITC reported strong results, with cigarette volume growth of around 9%. Cigarettes have seen a broad-based recovery, with volumes exceeding pre-pandemic levels. The non-cigarette FMCG business performed well thanks to targeted cost management interventions across the value chain, premiumization and sensible pricing actions.

A stable tax environment for cigarettes in recent years has allowed ITC to calibrate price increases to avoid demand disruption. Analysts expect this trend to continue, which should translate into improved cigarette volumes and earnings visibility over the medium term.

“While valuations of global tobacco peers have been restored to pre-pandemic (Jan 19) levels, ITC is still trading at a 24% discount to its Jan 19 valuation of 25.4x EPS term over one year. We value ITC at 21x FY24E EPS, implying a 65% premium to the global peer average. We believe the premium multiples are warranted, given its strong medium-term visibility and the defensive nature of its business, particularly in a volatile macro environment,” Motilal Oswal Financial Services analysts said in the update. annual day of the ITC.

Benign tax decision, associated with new products resulting in cigarette volumes; According to HDFC Securities analysts, the rise of e-commerce could provide tailwinds for FMCG business, but expanding distribution and supply chain optimization, coupled with smart manufacturing cost optimization , are the main positives of ITC’s recent performance.

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