ITC surpasses HUL to become the most-valued FMCG stock after 4 years

Thus far in calendar year 2023, the share price of ITC has appreciated by 48 per cent, while HUL's stock price has gained 1.3 per cent and the Sensex 8.8 per cent, respectively.

ITC, the cigarettes-to-hotels conglomerate, on Monday, surpassed Hindustan Unilever (HUL) to become the most-valuable fast moving consumer goods (FMCG) stock after a gap of more than four years.

ITC, last week, joined the elite group of companies having market valuation in excess of Rs 6 trillion. After surpassing HUL in market capitalisation (market cap) ranking, ITC entered into top five most valuable companies list with a market cap of Rs 6.14 trillion. With Rs 6.09 trillion market cap HUL slipped to sixth position in the overall ranking, at 09:38 AM, the BSE data shows.

Shares of HUL were down nearly 1 per cent to Rs 2,577.95 in intra-day trade so far, falling 5 per cent in past two days after the FMCG major reported its June quarter results. While, on the other hand the share price of ITC was up 1.3 per cent at Rs 496.40 in intra-day trade today. The stock hit a lifetime high of Rs 497.55 on Friday.

Thus far in the calendar year 2023, the stock price of ITC has appreciated 48 per cent on continued buying by the foreign portfolio investors (FPIs). In comparison, HUL’s share price was up 1.3 per cent, while the S&P BSE Sensex up 8.8 per cent during the period.

Earlier, on May 15, 2019, ITC’s market cap stood at Rs 3.64 trillion, and of HUL at Rs 3.62 trillion, the Capitaline data shows.

ITC is the biggest cigarettes & second largest FMCG company in India with around 80 per cent market share in cigarettes and presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. The company is also present in paperboard, printing & packaging business, agri and hotels businesses.

FPIs raised their ownership of the company in the most recent quarter, keeping in mind the positive prognosis for earnings growth. At the end of the June 2023 quarter, the total holding of Category-I & II FPIs had increased to 14.51 per cent. They held 14.21 per cent stake in March 2023 quarter, while it was 13.81 per cent in December 2022 quarter and 13.47 per cent at the end of September 2022 quarter.

Meanwhile, analysts at Axis Securities believe the narrative around ITC is getting stronger as all its businesses are on the right track. Key attributes of this narrative are stable cigarette volume growth led by market share gains and new product launches, the FMCG business reaching the inflexion point with improving EBIT margins.

The strong and stable growth in hotels as travel, wedding, and corporate activities pick up, moreover recent comment on possible demerger of hotels business will boost profitability for ITC, according to analysts. They further said, steady and decent performance in paperboard and agribusiness was witnessed in FY23.  Furthermore, reasonable valuation provides a huge margin of safety compared to other FMCG and discretionary peers. The brokerage firm recommended a BUY rating on the stock with a revised target price of Rs 540 per share.