ITC reports robust growth in share price in Q3 as cigarettes biz continues to be strong
According to analysts, ITC reported a strong quarter with robust all-around performance, with cigarettes business growing by 18% year on year (YoY), aided by strong volume recovery. The FMCG major increased its net profit by 21% to 5,031 crore in the third quarter ended December 2022.
“3Y cigarette volume CAGR at 6%+ was a key positive and a benign tax environment should maintain the momentum. FMCG growth was industry-leading, with a positive surprise on margins. EBITDA growth remained strong at >20% as the company continues to recover from the pandemic. We boost EPS by 4-6% and raise our PT to ₹450. Reiterate Buy on ITC shares,” said global brokerage Jefferies.
It has upgrade its FY23-25e EPS by 4-6%, marking the third straight quarter of EPS upgrades. “With only a modest ~2% tax hike in the budget, ITC should see continued momentum in the cigarette business, even as other segments also continue to do well,” it added.
ITC reported strong operational performance with broad-based growth across divisions in its 3QFY23 results, driving revenue/earnings growth. According to Antique Stock Broking, following the 2%-3% tax increase, the company’s price increase (if any) would have no effect on demand momentum.
“In our view, continued momentum in cigarette volume, improving sales/ profitability performance of other businesses (esp. FMCG, Paperboard, and Hotels) should continue to drive ITC’s overall performance. We maintain BUY recommendation on ITC shares with SoTP based revised target price of ₹435 (previously ₹419),” Antique recommended.
According to Edelweiss, legal cigarette players will continue to gain market share from illegal cigarette players, with ITC leading the pack. ITC is one of its top stock picks, with a ‘BUY’ rating and a SoTP-based TP of 450.
“We expect cigarette stocks to re-rate due to potential gains in market share and a stable tax policy. By dint of its focus on digital adoption, customer-centricity and agility, ITC continues to deliver strong growth across segments,” the brokerage added.
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