[ad_1]
Shares of ITC gained 2 per cent at Rs 279 on the BSE in Friday’s intra-day trade in an otherwise weak market, as a good defensive play in a volatile environment. The stock of the diversified fast moving consumer goods (FMCG) company quoted close to its 52-week high of Rs 282.30 touched on May 20, 2022. In comparison, the S&P BSE Sensex was down 1 per cent at 52,470 at 10:46 am.
In the past three months, ITC has outperformed the market by gaining 10 per cent, as against 12 per cent decline in the Sensex. Further, in six months, the stock has rallied 28 per cent as compared to a 10 per cent fall in the benchmark index.
Apart from having a near monopoly in its traditional business of cigarettes, ITC is also India’s leading FMCG marketer, a clear market leader in the Indian paperboard and packaging industry, a globally acknowledged pioneer in farmer empowerment through its wide-reaching agribusiness, a pre-eminent hotelier in India with chain of luxury hotels and a specialized global digital solutions provider through its wholly-owned subsidiary, ITC Infotech.
For January-March 2022 quarter (Q4FY22), ITC had reported strong results, with around 9 per cent cigarette volume growth. Cigarettes staged broad-based recovery, with volumes surpassing pre-pandemic levels. The non-cigarette FMCG business performed well through focused cost management interventions across the value chain, premiumisation, and judicious pricing actions.
A stable tax environment for cigarettes in recent years has allowed ITC to calibrate price increases to avoid a disruption in demand. Analysts expect this trend to continue and this should result in improved cigarette volumes and earnings visibility over the medium term.
“While valuations of global Tobacco peers have been restored to their pre-pandemic levels (Jan’19), ITC still trades at a 24 per cent discount to its Jan’19 valuation of 25.4x one-year forward EPS. We value ITC at 21x FY24E EPS, implying a 65 per cent premium to its global peer average. We believe the premium multiples are justified, given its strong visibility over the medium term and the defensive nature of its business, especially in a volatile macro environment,” analysts at Motilal Oswal Financial Services said in ITC’s annual update.
Benign tax ruling, coupled with new products driving Cigarette volumes; Ecommerce ramp-up could provide tailwinds for FMCG business, yet widening distribution, and supply chain optimization coupled with smart manufacturing optimizing costs are key positives from ITC’s recent performance, according to analysts at HDFC Securities.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
[ad_2]
Source link
