Even in light of ITC‘s lower-than-estimated June quarter revenue, leading brokerages continue to maintain an optimistic outlook on the Fast-Moving Consumer Goods (FMCG) major. Several top brokerage firms, including Morgan Stanley, Nuvama, Motilal Oswal, and Nirmal Bang, uphold a positive stance on ITC’s stock, projecting potential upsides ranging from 10% to 25%.
ITC’s Financial Performance
ITC reported a robust 18% year-on-year increase in net profit for the quarter ending June 2023, reaching Rs 4,903 crore. However, revenue from operations, excluding excise duty, declined by 8.5% YoY to Rs 15,828.20 crore. While net profit exceeded market expectations, revenue fell short of the estimated figure of Rs 16,893 crore. The company’s operating profit (EBITDA) demonstrated strong growth, rising by 10% YoY to Rs 5,083 crore, resulting in a significant expansion of operating margin by 541 basis points to 32.11%.
Positive Brokerage Recommendations
Several prominent brokerages have reiterated their buy recommendations for ITC’s stock, underscoring the company’s long-term potential:
- Morgan Stanley: The US-based investment bank maintains an ‘Overweight’ rating on ITC with a revised price target of Rs 493, marking a 10% estimated upside. Morgan Stanley praised ITC’s Q1FY24 earnings performance, highlighting the positive outlook for continued stock outperformance. The brokerage emphasized that all business segments exceeded expectations in terms of EBIT growth.
- Motilal Oswal: Motilal Oswal recommends buying ITC shares with a target price of Rs 535, projecting a 19% upside from the previous closing price. The brokerage believes that ITC’s earnings visibility is stronger compared to its peers. Despite industry uncertainties, ITC’s recovery in cigarette volumes offers favorable earnings visibility at reasonable valuations and an attractive dividend yield.
- Nuvama: Nuvama maintains a buy view on ITC, projecting a target price of Rs 560 within the next 12 months. The brokerage remains positive about ITC’s revenue momentum for FY24E, particularly with major segments performing well. Nuvama believes that ITC’s hotel business demerger will unlock additional value for shareholders, leading to a potential upside of 25%.
- Nirmal Bang: Nirmal Bang recommends buying ITC’s stock with a target price of Rs 520, reflecting a 15% projected upside. The brokerage noted that while Q1 sales were in line with estimates, margins positively surprised them. Nirmal Bang’s forecasts do not yet incorporate the potential demerger and listing of ITC’s hotels business, pending regulatory approvals.
Continued Confidence Despite Near-Term Challenges
While ITC’s Q1 revenue figures were below some market expectations, brokerages emphasize the company’s strong performance in other aspects, such as net profit growth and operational improvements. These brokerages see ITC as a promising investment option, citing various factors, including earnings visibility, favorable valuations, and potential unlocking of shareholder value through business demergers.
Disclaimer: The brokerage recommendations and projected upsides provided here are based on public information and should not be construed as financial advice. Always refer to official sources for the latest updates on stock performance and investment opportunities.