28 Oct , 2021 By : Kanchan Joshi
FMCG giant ITC's second quarter performance came above analysts estimates, although cigarette volumes were a bit lower which was offset by better margins, as per Jefferies. The net profit of the country’s largest cigarette maker rose to Rs3,697 crore in the three months ended 30 September from Rs3,252.6 crore in the year earlier.
Cigarette recovery appears healthy with exit volumes at near pre-Covid, highlighted analysts. "A further increase in mobility and ITC’s initiatives on portfolio expansion should drive a healthy recovery. However, a stable taxation policy remains key to sustaining steady growth ahead," said Emkay in a note. The brokerage has maintained its Buy rating on the stock with a target price of Rs270 per share.
The company, which also sells Aashirvaad wheat flour and Savlon soaps, said its standalone revenue from operations grew 12% to Rs13,553.52 crore in the September quarter from Rs12,103.75 crore a year earlier.
"FMCG expectedly slowed down, partially due to base issue but flat Ebitda margin was a positive. Paperboard continued to see strong YoY growth while hotels witnessed QoQ recovery. Feb-22 budget is a key event to watch for, given the expert group deciding on tobacco taxation," Jefferies note stated.
ITC has scaled up its distribution capabilities with a 2.1x YoY increase in stockist network and improved rural servicing infrastructure, which may add to medium-term potential, in Jefferies' view. It expects ITC stock to remain range-bound in the near term. Its buy rating comes with a target price of Rs300 apiece.
Low base and encouraging recovery in cigarettes, structural uptick in FMCG as well as 5% dividend/ FCF yield and modest valuations have made Axis Capital maintain its Buy tag on ITC shares with a target price of Rs290 apiece.
0 Comment