 "ITC share price gains 2%, hits new high on hopes of bullish growth outlook")
ITC share price today hit a new high of Rs 512.85, up 2 per cent on the BSE in Monday's intraday trade, on expectation of improvement in operational performance during the second half of the current financial year 2024-25 (H2 FY25). The stock of the fast moving consumer goods (FMCG) company surpassed its previous high of Rs 510.60, touched on July 24, 2024.
In the past six months, ITC share price has outperformed the market by surging 25 per cent as compared to 11.9 per cent rise in the BSE Sensex. However, thus far in the current calendar year 2024 (CY24), the stock has underperformed the market by gaining 9 per cent as against a 14-per cent rally in the benchmark index.
ITC's management, while announcing its June quarter (Q1FY25) results on August 1, had said that the Union Budget 2024-25 provided a strong impetus to engender a virtuous cycle of investment and employment whilst ensuring macro-economic stability and enabling inclusive growth.
"Moderating inflation, improving agri terms of trade, expectation of normal monsoons and the Government's thrust on public infrastructure and the rural sector augur well for a pick-up in consumption demand, building on the green shoots of recovery that are visible in rural markets," the company said.
Meanwhile, ITC demonstrated resilience across its segments with notable advancements in Cigarettes, FMCG, Hotels, and Agri businesses in the June quarter of FY25 (Q1FY25). The Paperboard segment, however, continued to be a laggard during the quarter.
Despite challenges, innovations, strategic expansions, and effective cost management contributed to growth. Going ahead, with a stable tax on cigarettes, analysts anticipate sustainable growth in the business.
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"The positive outlook is supported by rural recovery signs, stable commodity prices, and favorable macroeconomic conditions, positioning the company for consistent earnings growth in coming quarters," analysts at KRChoksey Shares and Securities said.
The brokerage firm anticipates a promising outlook for H2FY25 with accelerated pricing growth and gradual recovery in rural FMCG, bolstering ITC's performance. However, given the stock's significant jump, the brokerage sees limited scope for further upside. It has an 'accumulate' rating on ITC stock with a target price of Rs 545 per share.
Analysts at Axis Securities, meanwhile, believe ITC's long-term growth outlook remains strong as most businesses (excluding Paper) are on track with growth in cigarette volumes remaining stable, led by differentiated and premium offerings.
"The FMCG business reaching its inflexion point as Ebit margins continue to increase, driven by the ramp-up in outlet coverage, effective implementation of localisation strategy, premiumisation, use of demand and supply-side technologies, and moderating raw material input costs; and the demerger of the hotel business, which will strengthen ITC's balance sheet and improve return ratios. Additionally, the reasonable valuations provide a margin of safety," the brokerage firm said with a 'buy' rating on the stock and target price of Rs 550 per share.