ITC Stock Rally: Shares of ITC hit an over two-year high of Rs 273.10, up nearly 2 per cent on the BSE on Monday in an otherwise weak market. The stock has rallied 6 per cent in the past two sessions on expectation of strong earnings due to improved cigarette volumes.
The share price of the cigarettes to fast-moving consumer goods (FMCG) major was trading at its highest level since February 2021. ITC share price has shot up from Rs 208.50 (close price on NSE on 24th February 2021) to Rs 273.15 today. n this rally, ITC stocks climbed to new new 52-week high giving fresh breakout on technical chart at Rs 263 apiece levels. According to stock market experts, the stock is in bull trend and it has now strong support at Rs 255 levels.
So far in the calendar year 2022, ITC has outperformed the market by surging 25 per cent, as compared to a 1.6 per cent rise in the S&P BSE Sensex. It had previously hit a record high of Rs 353 on July 3, 2017.
Reasons Behind the Tremendous Rally
ITC is better-placed than peers with improving cigarette performance and strong earnings visibility. Analysts expect ITC to report a relatively stronger quarter, with improvement in cigarettes and other divisions and lesser margin pressure compared to FMCG peers.
Analysts at Emkay Global Financial Services estimate steady cigarette performance with sales/EBIT growth of 9 per cent/10 per cent. FMCG sales growth will be 9 per cent with margins staying flat year-on-year (YoY).
“We estimate strong performance in paper and agri with EBIT growth of 11 per cent/38 per cent and EBIT breakeven for hotels. Profit after tax growth is lower at 8 per cent due to lower other income and higher effective tax rate (ETR),” the brokerage said in a Q4 preview.
The Russia-Ukraine conflict has sent wheat prices soaring – benefiting ITC’s agri division that exports wheat. For the quarter to December, the agri division contributed a little over a quarter of ITC’s revenues with revenue growth almost doubling over the year-ago level and segment profit growth of 23%.
The lifting of Covid restrictions led to increased mobility and travel. This augurs well for ITC’s hotel division that significantly suffered the brunt of lockdowns and reduced mobility during the pandemic. The opening of educational institutions also means good news for the company’s stationery business.
Brokerage firm Edelweiss Wealth research report has also given a ‘buy’ tag to ITC shares expecting the stock to go up to ₹450 apiece levels in long term.
On fundamentals that may fuel ITC share price rally; the wealth research report said, “We expect the volume in cigarettes to revive at a CAGR of 5 per cent during FY22–24E as against a CAGR of -1 per cent during FY11–21; FMCG’s EBITDA margin to scale up to higher single digits; and the hotel, paperboard and agri-commodities businesses to revive. This will lead to an earnings CAGR of 12 per cent in FY22–24E against a mere 7 per cent in the last five years.”
Highlighting the bull trend visible on chart pattern of ITC share price; Edelweiss Wealth research report said, “A strong upside move of prices on the ratio chart of ITC/FMCG suggests a strong out-performance by the stock in the sector. Prices on the ratio chart suggest a base formation hinting towards the start of a strong out-performance by the stock. A probable formation of an inverted head and shoulder pattern on the weekly charts and a time series analysis on the quarterly chart indicate a change in trend and resurgence of the super bull cycle.” The report went on to add that ratio chart on a P&F platform indicates a strong base building formation underway for two years.
Read all the Latest Business News and Breaking News here
Comments
0 comment