FMCG giant ITC’s second quarter performance came above analysts estimates, although cigarette volumes were a bit lower which was offset by better margins, as per Jefferies. The net profit of the country’s largest cigarette maker rose to ₹3,697 crore in the three months ended 30 September from ₹3,252.6 crore in the year earlier.
Cigarette recovery appears healthy with exit volumes at near pre-Covid, highlighted analysts. “A further increase in mobility and ITC’s initiatives on portfolio expansion should drive a healthy recovery. However, a stable taxation policy remains key to sustaining steady growth ahead,” said Emkay in a note. The brokerage has maintained its Buy rating on the stock with a target price of ₹270 per share.
The company, which also sells Aashirvaad wheat flour and Savlon soaps, said its standalone revenue from operations grew 12% to ₹13,553.52 crore in the September quarter from ₹12,103.75 crore a year earlier.
“FMCG expectedly slowed down, partially due to base issue but flat Ebitda margin was a positive. Paperboard continued to see strong YoY growth while hotels witnessed QoQ recovery. Feb-22 budget is a key event to watch for, given the expert group deciding on tobacco taxation,” Jefferies note stated.
ITC has scaled up its distribution capabilities with a 2.1x YoY increase in stockist network and improved rural servicing infrastructure, which may add to medium-term potential, in Jefferies’ view. It expects ITC stock to remain range-bound in the near term. Its buy rating comes with a target price of ₹300 apiece.
Low base and encouraging recovery in cigarettes, structural uptick in FMCG as well as 5% dividend/ FCF yield and modest valuations have made Axis Capital maintain its Buy tag on ITC shares with a target price of ₹290 apiece.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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