ITC: ITC investors’ patience may finally pay off

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Mumbai: Price investorsPatience in the ‘cigarette-to-hotel group’ ITC can pay off in the end. store The benchmark Sensex, which has risen 30% to its all-time high in 2022, has emerged as one of the top gainers among bluechips in the period, as against a 9% fall in the benchmark Sensex. Market many . values ​​of companies The fall came amid dwindling investor appetite for riskier assets. The stock closed 4% higher at ₹284.35 on Friday.

Analysts said the company, which makes bingo chips and gold flake cigarettes, is becoming a major draw among investors as it is less affected by input cost inflation, has higher dividend yield, is growing consumer business and has strong growth prospects in the cigarette business. With this the hotel business is improving. which is its mainstay.

“More than 80% of gains come from cigarettes and it is one of the few stocks in the consumer sector that is relatively well insulated from commodity cost inflation,” said Gautam Duggad, head of research, Institutional Equities.

, “The cigarette business continues to improve and the stock is trading at a substantial discount in this sector despite strong payouts and free cash flow generation.”

ITC investors' patience may finally pay off

Motilal Oswal Financial, which recently upgraded the stock to buy with a target price of ₹335, said the stock is still trading at a 27% discount to its January 2019 valuation with one-year forward earnings per share. is trading at 25.4 times K.

ITC was the victim of a flurry of jokes on Dalal Street till last year due to the poor performance of the share price despite the roaring. Although the company’s earnings growth has been in line with expectations, the stock’s gains were capped partly due to concerns that foreign funds, focusing on ESG or environmental, social and governance investments, may lose their cigarettes. Will avoid this because of business. Some investors blamed the company for its misallocation of capital, making the stock one of Memester’s favorite targets on social media.

Analysts said margins are now less focused on environmental, social and governance norms, while investors are focusing on companies that can grow amid increased inflation.

“FY 23 will be a good year for ITC. Cigarettes should outperform and see double-digit profit growth,” said Avnish Roy, Executive Director, ITC. “It has safety as it is less affected by commodity inflation. It should see 15% returns in a year,” Roy said.

Duggad expects ITC’s profit growth to be 14% compounded over the next two years, as against 5% compounded growth in the last five years.

In the March quarter, ITC registered a growth of 11.8% over the March quarter to ₹4,190.96 crore, while revenue from operations grew 16% to ₹16,426 crore.

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