ITC, part of the S&P BSE Sensex index, has re-entered the elite top-10 club on Indian stock exchanges. At a market cap of Rs 3,63,907 crore on Monday’s closing price, ITC beat Airtel to regain the 10th spot. Going by the market capitalisation of all listed companies on BSE, ‘meme stock’ ITC is now India’s 10th largest company, leaving behind giants and Dalal Street favourites like Bharti Airtel, Bajaj Finance, Adani Green Energy, Kotak Mahindra Bank, and others.
So far in the calendar year 2022, ITC has outperformed the market by surging over 34 per cent as against an 8.5 per cent decline in the Sensex. ITC also hit a 52-week high of Rs 296.95 and is now within close distance of the Rs 300 mark.
Apart from having a near-monopoly in its traditional business of cigarettes, ITC is also India’s leading FMCG marketer, a clear market leader in the Indian paperboard and packaging industry, globally acknowledged in farmer empowerment through its wide-reaching agribusiness, and a pre-eminent hotelier in India with chain of luxury hotels.
The company’s cigarettes business staged a broad-based recovery, with volumes surpassing pre-pandemic levels. A stable tax environment for cigarettes in recent years has allowed ITC to calibrate price increases to avoid a disruption in demand. The non-cigarette FMCG business performed well through focused cost management interventions across the value chain, premiumisation, and judicious pricing actions.
ITC is expected to post strong 23.3 per cent year on year (YoY) revenue growth led by 21.8 per cent growth in the cigarettes business, 28 per cent YoY growth in paperboard business and 17.5 per cent YoY growth in FMCG business, ICICI Securities said in its Q1 result preview.
“The strong growth in cigarette business is mainly on account of recovery in cigarette volumes to the pre-Covid levels. The growth in paperboard business is contributed by high volumes from low base quarter & strong pricing growth given paper prices globally have gone up sharply due to energy shortage in Europe. The growth in FMCG business is likely to be aided by recovery in stationary business and pricing growth in foods, personal care businesses. Agri business sales is expected to be flat given wheat export was banned during the quarter & hotels business is expected to clock pre-Covid sales in Q1”, the brokerage said.
A revival in cigarette demand, recovery in some profitable FMCG-other categories, and a reduced lag in the hotels business coupled with lower input cost pressures than peers and attractive valuations make ITC a top pick from a one-year perspective, according to Motilal Oswal Financial Services.
We expect an 11 per cent volume growth in cigarettes and gross margin expansion of 190 bps YoY on better cigarette mix and reduction in lag from hotels. The key monitorables include cigarettes volume and hotels revenue post opening of workplaces and an increase in travel. Outlook on the agri, paper & packaging and hotel businesses will also be watched out, the brokerage firm said in its results preview.
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