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August 18, 2022

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Income Tax Software

ITC Stock Price: Buy, Sell or Hold: What should investors do with ITC after the June quarter results?

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The rally may not end amid positive remarks from most of the brokerage firms eyeing the diversified FMCG major, with a growth of over 40 per cent so far in the year 2022.

The stock rose from Rs 218 on 31 December 2021 to Rs 307 on 1 August 2022, which translates into an increase of over 40 per cent so far in 2022.

Most of the brokerage firms tracking ITC have maintained their ratings and could see a rise of over 10 per cent in the next 12 months which could take the stock to a new 52-week high.

FMCG major net profit rose 38 per cent to Rs 4,169.4 crore for the first quarter ended June, while revenue from operations rose 41 per cent to Rs 18,320.2 crore.

The group attributed the performance, including strong performance across all businesses, to accelerated digital adoption and gradual improvement to a focus on agility.
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According to brokerage reports, long-term investors can buy the stock now or on a downside for a possible target of Rs 350.

After a sharp rally, the stock is now trading near the overbought zone and a pullback could be in the offing. It is trading above the all important short and long term moving averages at 5,10,20,30,50,100 and 200-DMA.

The Relative Strength Index (RSI) is at 75.7. An RSI above 70 is considered overbought. This means the stock could show a pullback, trendline data showed. The MACD is above its center and signal line, which is a bullish indicator.

We have compiled a list of recommendations from various brokerages following the Q1 results:

CLSA: Buy| Target Rs 330| up 7%
CLSA maintained its buy rating on ITC after June quarter results with a target price of Rs 330, up 7 per cent from Rs 307 recorded on August 1.

The recovery in mobility helps in strong recovery in revenue and margins. The cigarette business registered a growth of 25 per cent. Margins are stable at 74 per cent.

The note says that ITC remains our preferred pick at Staples.

JP Morgan: Overweight | Target Rs 350. up 14%
JP Morgan maintained its overweight rating on ITC after the June quarter results with a target price of Rs 350, up 14 per cent from Rs 307 recorded on August 1.

“Q1 beat most of the estimates and the company is firing on all cylinders. ITC also reported strong Q1FY23 operating performance,” the brokerage said.

ITC continues to strengthen its competitive position across all categories. Global investment bank hikes FY23E PAT by ~2 per cent.

Sharekhan: Buy| Target Rs 350. up 14%
Sharekhan maintained its buy rating on ITC after June quarter results with a target price of Rs 350, up 14 per cent from Rs 307 recorded on August 1.

“We expect the growth momentum of cigarette sales to continue as the government curbs illicit cigarette sales. Hotel business will maintain strong growth momentum due to high demand for domestic leisure travel,” the report said.

Non-cigarette FMCG revenue will grow in double digits, while margins may improve sequentially in the coming quarters.

Elara Global: Accumulate| Target Rs 338 | up 10%
Elara Global maintained its accumulation rating on ITC after June quarter results with a target price of Rs 338, which is almost 10 per cent higher than Rs 307 recorded on August 1.

It added, “We upgrade our earnings projections to 4.5 per cent for FY23 and 6 per cent for FY24 as a factor of higher sales growth, partly due to the impact of inflation and changes in the mix.” The reasons are offset by lower margins.”

The brokerage said the stock is well placed in the short term on the back of higher dividend yield (~5.0 per cent), less impact of higher input prices and improvement in cigarette volumes.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)

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