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Brokerages Stay Bullish On ITC After Q4 Results; Shares Decline – BloombergQuint

Most brokerages stayed bullish on ITC Ltd., expecting the consumer goods maker’s paperboards, packaging and hotel segments to recover once mobility improves, and on improving volumes for its mainstay cigarette business. But the impact of the goods and services tax on volumes needs to be monitored.

The company saw its cigarette segment’s revenue rise 6.9% sequentially to Rs 6,508.43 crore in the quarter ended March. Gross profit of the cigarette division rose 6.5% during the period.

“The [cigarette] segment saw continued progressive volume recovery to nearly pre-Covid levels. We believe that cigarette volume to have been up by 6-7% year-on-year,” Nirmal Bang said in a report.

Better cigarette sales lifted the company’s overall bottom line. ITC’s total revenue, too, increased over the preceding three months.

Shares of ITC, however, fell as much as 2% in early trade on Wednesday to Rs 210.85 apiece, compared with NSE Nifty 50 index’s 0.5% drop. Of the 38 analysts tracking the company, 30 have a ‘buy’ rating, seven recommend a ‘hold’ and one suggests a ‘sell’, according to Bloomberg data. The average of the consensus price targets implies an upside of 18.7%.

Here’s what brokerages have to say about ITC’s fourth-quarter results…


  • Maintains ‘buy’ rating with a target price of Rs 270 apiece.

  • “Given Covid-19-related concerns, we find consumer staple firms better placed given the defensive nature of the business.”

  • Volume recovery in cigarette business as Covid-19 issues settle down.

  • The agri, paperboard, and hotel businesses, after seeing a decline in FY21 on account of Covid-19, are expected to see a sharper recovery.


  • Maintains ‘buy’ with a target price of Rs 265 per share.

  • The inflationary setting is likely to influence its near-term margin.

  • Remains confident in the improving margin trajectory for the other FMCG business on the back of an improving sales mix.

  • A slower-than-expected cigarette business recovery is a key risk.

Motilal Oswal

  • Maintains ‘neutral’ with a target price of Rs 220 apiece.

  • Cigarette business likely to contribute over 82% to ITC’s overall EBIT.

  • Overhang of a possible GST increase going forward.

  • Dividend yield of 5-6% is expected over the next two years.

Nirmal Bang

  • Maintains ‘accumulate’ rating with a target price of Rs 240 per share.

  • It will take the (FMCG-others) segment a few more years to contribute meaningfully to the company’s profit.

  • Expects other businesses (especially paperboards, paper & packaging and hotels) to also do progressively well over the next few quarters once mobility improves.

  • Surprise in top line came from agri business, driven by export opportunities in wheat to Bangladesh, Malaysia, Sri Lanka and U.A.E.


  • Maintains ‘hold’ rating with a target price of Rs 241 per share.

  • The National Calamity Contingent Duty tax hike announced during the Union budget 2020 raises concern that now the government has two levers to tweak taxes — the Union budget and GST meetings.

  • Price hikes may lead to better GST collections, but its impact on volumes needs to be monitored.

  • The cigarette opportunity in India remains attractive given per capita consumption.

  • For the FMCG business, the company would like to see market share gains across most categories.

IDBI Capital

  • Maintains ‘buy’ rating with a target price of Rs 275 apiece.

  • Maintains rating on the stock due to in-expensive valuation.

  • Overall business witnessed a strong recovery in discretionary and out-of-home products.

  • Cigarettes business also witnessed continued recovery, driven by the progressive easing of restriction and increased mobility.