FMCG giant stock, ITC share price has been in red for over a month now, erasing quite a lot of YTD gains. Despite this, brokerage Anand Rathi has recommended BUY on ITC owing to the company's strong balance sheet and no external debt. The outlook of ITC growth is healthy ahead.
ITC Share Price:
The heavyweight FMCG stock has lost a lot of steam in the past one month. Currently, the stock price is at Rs 472.70 apiece with a market cap of Rs 5.92 lakh crore.
Its weekly performance is down by 1.9%. While in a month, the stock dropped by 4.9%. Due to these falls, ITC's gains YTD have been squeezed to marginal by 1.2%.
Anand Rathi On ITC Stock:
The brokerage highlighted that ITC's cigarette business grew 7.3% YoY led by an improved mix, strategic cost management calibrated pricing actions and cost escalation in leaf tobacco. While FMCG sales grew 5.4% YoY to Rs55,777 mn impacted by overall consumption slowdown. The food portfolio continued its strong performance led by continued momentum in staples, snacks, dairy, personal wash, fragrances, homecare & agarbattis.
Meanwhile, its hotel business revenue grew 12% YoY to Rs7,277 mn driven by F&B, retail and wedding segments. The Company's first international property ITC Ratnadipa which was opened in Apr'24 in Colombo, Sri Lanka continued to gain good response and appreciation. And, The agribusiness business grew by 47% YoY to Rs57,805 mn led by leaf tobacco exports leveraging strong customer relationships and new business development & value-added agri products. Lastly, the paperboard segment performance grew by 2% YoY to Rs21,141 mn with a margin fall of 379 bps to 11.5% this was impacted by low-priced Chinese supplies in global markets, including India, and higher domestic wood prices, as per the brokerage.
That being said, on the valuation, Anand Rathi said, the company's branded packaged food businesses like 'Aashirvaad' Atta, 'Aashirvaad' Salt, 'Sunfeast' Biscuits and Cakes, 'YiPPee!' Noodles, 'Bingo!' Snacks etc and even personal care portfolio have continued to gain traction. Going ahead, the company's strong balance sheet with no external debt, the demerger of the hotel business unlocks value which will support profitability and return ratios in coming quarters.
Hence, it lastly added, "We maintain our BUY rating on the stock with a target price of ₹ 560."
ITC Corporate Actions:
Since its listing, ITC has rewarded investors with bonus issues, stock splits and dividends over the years since its listing.
Dividends: The FMCG giant has delivered up to 29 dividends since July 2001, as per Trendlyne data. In the last 12 months, the dividend payout is Rs 13.75 per share.
Bonus Issues: The company has a strong track record of bonus shares. The last bonus was of 1:2 ratio in July 2016, while ITC delivered 1:1 and 1:2 bonus ratios in August 2010 and September 2005. ITC has overall delivered 3 bonus shares.
Stock Split: Further, ITC has carried a single stock split so far. In September 2005, ITC's shares split from Rs 10 face value to Rs 1 each, hence a ratio of 1:10.
Going ahead, ITC is going to demerger its hotels 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. The balance stake of about 40% will be held by ITC.
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