1:10 Split: FMCG Stock ITC Good For Long-Term Wealth Creation, Prabhudas, Motilal, 6 Others Recommend BUY

FMCG giant, ITC Ltd has been the talk of the town this trading week due to one of the highest block deals on the Indian stock exchange. Further, amidst robust FMCG-other and cigarette business growth, ITC is also tapping its hotel and tourism segment with two acquisitions. Brokerages see long-term gains in ITC which is currently undervalued.

Some 8 brokerages have recommended buying on ITC with the highest target price being at Rs 533 apiece. YTD, ITC shares are down by 10% on BSE, and in a year, the stock could fetch single-digit gains of 10%. Its 5-year performance has been healthy with an upside of 41% as of now. But its all-time gain is a massive 7,727.43% on BSE to date.

Throughout the ear, ITC has emerged among the dividend king stock category in the FMCG sector, while it carried one stock split and rewarded investors with three bonuses.

Why ITC Is In Focus Recently?

On March 13, British American Tobacco Plc announced that it had completed the block trade of 436,851,457 ordinary shares (the "Block Trade Shares") in ITC Limited ("ITC") to institutional investors by way of an accelerated book build process (the "Block Trade"). The Block Trade Shares represent c.3.5 per cent of ITC's issued ordinary share capital.

BAT added, "This will enable the allocation of operating cashflow to fund investment in our transformation, continue to deleverage towards our new target range of 2-2.5x adjusted net debt / adjusted EBITDA, while also maintaining a progressive dividend and supporting a sustainable share buyback."

Post the block deal, BAT still holds a 25.5% stake in ITC.

ITC Acquisition:

Apart from this, ITC also announced of Share Purchase Agreement with its wholly owned subsidiary, Russell Credit on March 15 for the acquisition of (i) 36,26,633 Equity Shares of Rs. 10/- each of International Travel House Limited (ITHL), a listed associate company, representing 45.36% of ITHL's share capital, and (ii) 90,000 Equity Shares of Rs. 100/- each of Maharaja Heritage Resorts Limited (MHRL), an unlisted joint venture company, representing 25% of MHRL's share capital.

ITC Dividend:

Since July 2001, ITC has delivered up to 21 dividends to its investors. The latest payout was of 625% or Rs 6.25 per share for interim dividend for FY24.

Currently, ITC has a dividend yield of 3.8%.

ITC Stock Split And Bonus Charm:

The FMCG player announced a stock split only once in two decades. It was on September 21, 2005, when ITC turned ex-split for splitting its 1 equity share into ten equity shares. The face value was trimmed to Re 1 from Rs 10, hence, a stock split ratio of 1:10.

Meanwhile, ITC also turned ex-bonus for a 1-to-2 ratio on September 21, 2005. This meant that ITC awarded 1 new bonus share on the existing two equity shares. ITC further declared a 1:1 bonus issue in August 2010, and a 1:2 ratio in July 2016.

ITC Share Price:

ITC shares ended the week at Rs 419.55 apiece broadly flat on Friday with a market cap of Rs 5,23,660.08 crore. Ahead of the block deal on March 13, ITC shares recorded its single-biggest gain of 9% since September 2021.

The stock's 52-week high and low is at Rs 499.60 apiece and Rs 369.70 respectively.

ITC Share Price Target:

Vaishali Prakesh, Vice President- Technical Research at Prabhudas Lilladher said, "The stock has given a decent correction from the peal level of 480, and has bottomed out near the 398 zone. Currently, after a short consolidation, it has improved the bias with a positive candle."

Parekh added, "The RSI is well placed and has shown a trend reversal with the potential to rise further in the coming days. With the chart looking good, we suggest buying this stock for an upside target of Rs 470, while keeping the stop loss of 405."

Also, Jigar S. Patel, Research Analyst at Anand Rathi said, "one can buy in the zone of 420-430 with an upside target of 475 and a stop-loss would be placed near 399 on a daily close basis."

Additionally, JP Morgan has maintained overweight at the latest on the company for a target price of Rs 490 with a positive outlook.

On the other hand, Jefferies has said to hold the stock for a target price of Rs 430 with a neutral outlook.

Moreover, Kotak Institutional Equities has recommended ADD on the stock for a target price of Rs 460.

Furthermore, Motilal Oswal has suggested BUY on ITC for a target price of Rs 515.

Additionally, BOB Capital Market has a buy call for a target price of Rs 532, while KR Choksey has set the highest target price of Rs 533.30 on ITC. The highest potential upside is seen at about 27.3% in ITC going forward.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.