FMCG giant ITC continues to have a positive outlook in its growth story going ahead, as brokerages like Goldman Sachs and BOB Capital Markets recommend BUY on the stock. ITC has corrected significantly since last month and is currently trading below Rs 475, creating a buy-on-dips opportunity for investors.
ITC Share Price:
Last week on Friday, ITC's share price dropped by 1.33% to close at Rs 465.85 apiece on BSE, with a market cap of Rs 5,82,764.02 crore. The stock has significantly corrected from its 52-week high of Rs 528.55 apiece, while its 52-week low is Rs 399.30 apiece.
ITC's weekly performance is down by 2.35%, while in a month, the decline widened by 6.56%.
Going ahead, ITC is all set to demerge its hotel business which will be in the ratio of 1:10. Because as part of the merger process, for every (Ten) Ordinary Shares of the face and paid-up value of Re. 1 each held in ITC, 1 (One) equity share of the face and paid-up value of Re. 1 in ITC Hotels. After the completion, ITC's stake will be reduced. The shareholders of ITC will hold about 60% of ITC Hotels directly, which is proportionate to their shareholding in ITC. ITC will hold a balanced stake of about 40%.
BOB Capital Markets On ITC:
On ITC, BOBCAP's sales forecasts for FY25 are relatively unchanged but lower in FY26 and FY27. Cigarette volumes increased 3% during 2Q (~6% in the June quarter) and sales were mainly driven by the Agribusiness segment which is a pass-through business. The brokerage said that the company's EBITDA margin will be lower in FY25 as pricing will gradually be passed through to offset inflation.
The brokerage assumes the trend is inflationary, but calibrated pricing will largely offset inflation by FY25E end.
Accordingly, on the valuation, BOBCAP said, "We lower margin forecasts for FY25 but model a recovery in FY26. Given reasonable earnings visibility in the cigarette and FMCG businesses, we maintain BUY on ITC. Our SOTP-based TP stands revised from Rs 575 to Rs 556 (change in estimates)."
Recently, global brokerage Goldman Sachs has also taken a liking to ITC, as it believes the company's margin pressures in businesses like paper over the past four quarters, are likely to ease in the second half of FY25, as base margins are expected to be low. This is likely to reduce the low year-on-year decline in margins.
ITC Corporate Actions:
ITC has a strong record of bonus issues and dividends, while the company has split its shares once in its history of listing on BSE and NSE.
Bonus Issue: ITC has rewarded its shareholders with three bonuses. The first bonus of the 1:2 ratio was in September 2005, followed by the second bonus of 1:1 which was in August 2010. Also, ITC delivered a bonus of 1:2 in July 2016.
Dividends: Since July 2001, the company has delivered up to 29 dividends, as per Trendlyne data. In the past 12 months, the dividend payout stood at Rs 13.75 per share. Currently, ITC's dividend yield is about 2.95%.
Stock Split: The only time ITC split its shares was in September 2005 in the ratio of 1:10. The face value of Rs 10 has been trimmed to Rs 1 since September 28, 2005.
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