 "ITC trades higher for fifth straight day; surges 3% in subdued market")
The stock of diversified fast moving consumer goods (FMCG) company quoted higher for the fifth straight trading day and has rallied 8 per cent during the period. In comparison, the S&P BSE Sensex was flat at 65,481 at 11:44 AM. ITC was the top gainer among the benchmark index stocks.
A strong outperformance of ITC saw the conglomerate's market capitalisation (m-cap) inch towards Rs 6 trillion-mark. The company’s market cap touched Rs 5.96 trillion in intra-day trade, which was less than 1 per cent away from the milestone. Hindustan Unilever, the other FMCG company, has a market cap of Rs 6.42 trillion, data shows.
ITC is biggest cigarettes & second largest FMCG company in India with around 80 per cent market share in cigarettes & presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. The company is also present in paperboard, printing & packaging business, agri & hotels businesses.
ITC had said the FMCG Businesses continue to expand their export footprint leveraging the equity of their worldclass brands – with a reach now spanning over 60 countries. The PLI scheme has provided further fillip to the Company’s exports across Biscuits & Cakes, Snacks, Dairy and Ready-to-Eat categories.
Analysts expect stronger-than-anticipated demand rebound and a positive outlook for margins in the Cigarettes segment. This, along with strong sales momentum in all the major segments remains a key growth driver for ITC. Product innovation, efficient supply chain and focus on digitalisation will also drive revenue.
A broad-based fall in raw material/ commodity prices is expected to provide a further respite to consumer companies during 1QFY24, and subsequently may also aid rural demand in the coming months. Going ahead, moderating inflation coupled with a pick-up in monsoon should help rural demand recover, analysts at Antique Stock Broking said in FMCG sector report.
ITC continues to witness strong volume growth in cigarette business largely gaining share from contrabands & illicit cigarettes. Analysts at ICICI Securities believe the company would be able to achieve its target operating margins expansion by 100- 150 bps every year by leveraging its strong brands through extension in many food adjacencies.
“We also believe Hotels business would continue to grow at a faster pace in medium term with significant improvement in mobility in post covid period. Despite strong run up in the stock, it is still trading at attractive multiples compared to other FMCG companies. We remain positive on long term growth outlook for the company & maintain our BUY recommendation with the revised target price on stock to Rs 500 / share (earlier Rs 450 /share),” the brokerage firm said in March quarter result update.
Technical View
Bias: Positive
Target: Rs 500
Support: Rs 469
ITC has witnessed a steady up move since January 2021, and has zoomed as much as 122 since then. The stock has logged monthly gains in the last 14 out of the 16 months since January 2021.
The uptrend remains positive even as the stock trades in the overbought category on multiple time-frames. In the very near-term, the stock is likely to remain bullish as long as the stock trades above Rs 469.
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On the upside, the stock could test the Rs 500-mark, indicates the quarterly Fibonacci chart.
(With inputs from Rex Cano)