ITC trades ex-date for dividend; stock gains over 2% in subdued market

Shares of ITC continued their upward movement, gaining 2.4 per cent to Rs 450.55 on the BSE in Tuesday’s intra-day trade in otherwise subdued market. The stock of the biggest cigarettes & second largest fast moving consumer goods (FMCG) company turned ex-date for dividend of Rs 9.50 per share today.

It had hit a record high of Rs 451.75 on Monday, May 29, 2023. In comparison, the S&P BSE Sensex was up 0.06 per cent at 62,881 at 01:21 pm.

On May 18, ITC's board recommended a final dividend of Rs 6.75 and a special dividend of Rs 2.75 per share for the financial year ending March 31, 2023. The company fixed May 30, 2023 as the record date for the purpose of determining entitlement of the members for payment of dividend.

ITC saw strong revenue growth across businesses in the financial year 2022-23 (FY23). The company also saw margin gains across business segments as the input cost inflation was mitigated by sourcing efficiencies, premiumization, supply chain efficiencies, and pricing strategies.

Thus far in the calendar year 2023, ITC has outperformed the market by surging 35 per cent, as compared to 2.8 per cent rise in the S&P BSE Sensex. In the past one year, it has zoomed 67 per cent, as against 12.4 per cent rally in the benchmark index.

Axis Securities believes the narrative around ITC is getting stronger as all its businesses are on the right track with stable cigarette volume growth led by market share gains and new product launches.

"The stock is currently trading at 21x FY25E EPS and a 3-4 per cent dividend yield provides a huge margin of safety compared to its peers. Moreover, with a stable outlook for the cigarette volume growth (led by market share gain from illicit trade along with new product launches), the FMCG business has reached an inflexion point with its Ebit margins inching up further, strong and stable growth witnessed in hotels, and steady and decent performance outlook in paperboard and agribusiness, ITC makes a better play in the entire FMCG pack where valuations of other players stand elevated," the brokerage firm said in result update.

Analysts at KRChoksey Shares and Securities, too, maintains 'buy' rating on ITC with a target price of Rs 492 per share. The brokerage firm said it likes the company’s ability to deliver a strong topline as well as profitability improvement even in a difficult year. The cigarette business continues to benefit from taking a share away from illicit trade, a stable tax structure, and premiumization. The FMCG business has strengthened its topline and profitability in a year where inflation impacted demand for the industry.

“We like the margin trajectory of the Cigarettes, FMCG and Hotels business. We expect the margin profile of the Packaging business to improve from the dip seen in Q4FY23 driven by new growth vectors, increased value addition and capacity utilization,” analyst said.