ITC moves towards 52-week high, stock gains 17% in past month

Shares of ITC continued to rise and registered a five-month high at Rs 253.24 after surging 1.3% on the BSE in Wednesday’s intra-day trade on expectations of strong earnings. The stock of the cigarettes to fast-moving consumer goods (FMCG) conglomerate is now moving towards its 52-week high level of Rs 263.30, touched on October 18, 2021.

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ITC Limited has outperformed the market by gaining 17% in the past month. In contrast, the S&P BSE Sensex was up by 1.6%, and the S&P BSE FMCG index was up 0.63%.

In the October-December quarter (Q3FY22), ITC posted strong revenue performance across businesses on the back of robust recovery across markets due to a rise in mobility and an efficient distribution system.

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ITC reported a 14.81% year-on-year (YoY) rise in consolidated profit after tax (PAT) at Rs 4,118.80 crore in the December quarter as compared to Rs 3,587 crore in the year-ago period. Its consolidated revenues were Rs 18,366 crore, up 30% from Rs 14,124 crore in the year-ago period.

The company’s cigarette business, which was severely impacted in the last two years due to Covid-19 disruptions, reported a strong recovery in the third quarter. Cigarette revenue in the December quarter increased to Rs 6,959 crore from Rs 6,091 crore in the same quarter a year ago. The segment recorded a pre-tax profit of Rs 4,187 crore, compared with Rs 3,659 crore a year earlier.

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The paperboard business reported strong volumes and performance on the back of a rise in demand across most end-user segments, exports and higher realisations. Besides that, the relaxation of travel restrictions, the increase in leisure travel, and the beginning of the festive/wedding season all boosted occupancy levels and average revenue per available room (ARR) for the hotels business.

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ITC’s agri business reported 100% growth in revenue driven by robust revenue growth in wheat, rice, spices, and leaf tobacco exports due to its strong customer relationships, robust sourcing network and agile execution. The company has seen strong growth in its value-added portfolio.

According to analysts by ICICI Securities, stable taxation on cigarettes would result in high growth in cigarette volumes in the medium term. Also, they expect the FMCG business margin uptick trajectory to continue (once elevated commodity prices normalise).

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“We are positive on FMCG growth and margin expansion possibility and the company’s better capital allocation policy (higher dividend pay-out and no more capex on the hotels business),” the brokerage firm said in its third-quarter result update.