ITC shares surged 2.96% on Tuesday reaching a 52-week high of Rs 316.65 on BSE, a day after the company posted improved figures for the quarter ending June 2022.

ITC said that its net profit on a consolidated basis for Q1FY23 was Rs 4,462.25 crore, up 33.46% from Rs 3,343.44 crore the previous year.

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The result was higher than expected, as a CNBC TV18 poll of analysts predicted a profit of Rs 4,050 crore.

Revenue from operations was Rs 19,831.27 crore, up 39.25% from Rs 14,240.76 crore in the same quarter last year.

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The company said that revenue from its cigarettes business increased 28.63% year on year (YoY) to Rs 7,464.10 crore, while revenue from non-cigarette businesses increased 19.49% YoY to Rs 4,458.71 crore.

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Analysts at Motilal Oswal Financial Services have turned constructive on the stock, led by a better than expected demand recovery and a healthy margin outlook in Cigarettes, robust sales momentum in the FMCG business, and lower drag from the Hotels business, and better capital allocation in recent years. While valuations of global Tobacco peers have returned to pre-COVID levels (Jan’19), at 18.8x FY24 EPS, ITC still trades at a 26% discount to its Jan’19 valuations of 25.4x one-year forward EPS, they said.

“We see scope for further upside, based on a healthy earnings outlook,” analysts said.

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Analysts at ICICI Securities expect ITC stock to benefit from the expectation of Value (on the current FCF profile basis) to outperform the Growth/Expensive basket, potential price hikes in cigarettes in the current inflationary environment (better consumer acceptance likely), good underlying performance in the FMCG business, and improving outlook (cyclical upturn) for the hotels business. ICICI Securities noted that key downside risk includes tax hikes much ahead of inflation leading to volume pressure (on cigarettes) as price elasticity is still unfavourable.