ITC share price shed 3 percent in the early trade on February 12 a day after the company said it has registered a 11.4 percent year-on-year decline in consolidated profit at Rs 3,587.09 crore in the quarter ended December 2020. Consolidated profit in the corresponding period stood at Rs 4,050.4 crore.
Consolidated revenue from operations grew by 6.1 percent year-on-year to Rs 14,124.48 crore in Q3FY21, with cigarette business showing 2.5 percent YoY growth in operating revenue
Also Read – ITC Q3 profit falls 11.4% to Rs 3,587 crore; cigarette EBIT dips 8.7%
Here is what brokerages have to say about the stock and the company after Q3 earnings announcement:
Credit Suisse has kept outperform rating on the stock with a target at Rs 265 per share. The cigarette recovery augers well for FY22 with healthy FMCG performance.
Research house remain positive on the company as we see strong cigarette recovery. It see potential re-structuring & increasing value of FMCG business, reported CNBC-TV18.
Research house maintain neutral call on the stock with a target at Rs 215.
Cigarette trends are slightly better than feared, while other FMCG was moderates. The possible news relating to any changes in regulations are key to watch. There will be tracking developments like demerger/value-unlocking of smaller businesses, reported CNBC-TV18.
ITC’s FMCG business continues its upward trajectory with 11% comparable sales growth and 9.2% EBIDTA margins. Cigarette volume continue to disappoint with 5% decline. Hotel business also turned EBITDA positive in Dec’20 though we do not expect it to impact overall EBITDA significantly.
We believe strong sales momentum in Foods, Hygiene and growth across the discretionary portfolio will aid in overall recovery. We believe ITC would be one of the key beneficiary of an uptick in consumer demand given the depth and width of its portfolio, fast paced launches and innovations. Maintain buy with SOTP based target price of Rs254 (valuing cigarette business at 15xFY23 EPS, 59% of value).
With no major increase in taxes on cigarettes in Union Budget, we expect cigarette sales volume to normalise in the next two quarters. The non-cigarette FMCG business is expected to deliver strong performance due to better reach and strong traction to new launches.
Management’s enhance focus and redefined growth strategies have aided scale of the non-cigarette FMCG business margins. The stock is currently trading at 16.1x its FY2023E EPS. Any sustained scale-up in the margins of the cigarette business coupled with normalisation in the core cigarette business would be key triggers for valuation uptick. We maintain our buy recommendation on the stock with a revised price target of Rs. 265 (19x its FY2023E EPS).
We have maintained our FY22/23E EPS estimates Rs 12.7/13.6. Though the stock is trading at a steep discount to other FMCG peers, we believe that the stock would remain under pressure due to volume decline in core cigarette business and falling EBIT margins. Considering recent run-up in the stock price we downgrade the stock to sell with target price of Rs 199.
At 09:17 hrs ITC was quoting at Rs 222.20, down Rs 4.25, or 1.88 percent on the BSE.
The share touched its 52-week high Rs 239.15 and 52-week low Rs 134.95 on 09 February, 2021 and 13 March, 2020, respectively.
Currently, it is trading 7.09 percent below its 52-week high and 64.65 percent above its 52-week low.